Proposed changes to a VAT refund scheme, availed of by non-EU residents who purchase craft and gift items here, will impact jobs, tourism and the retail sector, a report published today concludes.
The study was conducted by economist Jim Power on behalf of the 'Stop Another Tourism Tax' Campaign - an alliance of independent Irish retailers and tourism businesses.
It projects that family businesses in the West of Ireland would be predominantly impacted if the changes are implemented.
The Retail Export Scheme, as it currently exists, allows non-EU tourists to claim VAT refunds on quality Irish craft and gift items purchased in Ireland.
However, the Government's Brexit Omnibus Bill 2020, which is being brought through the Oireachtas, will exclude all purchases under €175 from the scheme.
This means that a tourist in Ireland will have to spend at least €175 on a single purchase to avail of a VAT refund.
In his report, Mr Power estimates that almost 85% of refunds under the current scheme are on purchases of less than €175.
The study calculated that, in effect, the real price of tourist purchases would rise by up to 23%.
Although the VAT rate has been reduced temporarily to 21% to help businesses deal with the fallout from the Covid-19 pandemic, it is due to revert to 23% at the end of February.
"This would be very significant and would undoubtedly undermine such spending and the overall contribution of tourism to the economy," the report concludes.
The economist calculates that the scheme, in its current guise, contributes just over €108m to the economy, with a large portion of that spend going to regional areas, particularly along the Wild Atlantic Way.
"The tourism and retail sectors have been decimated by Covid-19 and they face a very challenging future," Jim Power said in his analysis.
"They need as much support as possible over the coming years. Increasing the Retail Export Scheme threshold to €175 would not represent support, and it would totally fly in the face of the ongoing efforts to promote Irish tourism," he concluded.
He added that up to 1,200 jobs are at risk in the affected sectors.
"It is crystal clear that regional economic activity, regional employment, the sustainability of regional towns and the overall health of the retail sector are at risk," he stated.