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Irish Budget 2013

How Ireland's Austerity Measures May Affect the Tourist


Now it is official - another hairshirt budget has been released by the Irish government and will shape the year 2013 (with some measures coming into effect immediately, midnight on December 6th, 2012).

While you might say it could have been worse, it could also have attacked the undeniable problems from several different angles. But since Ireland is, to a large extent, in the profitable business of being a legal tax haven for multinational companies (Leinster House would phrase this different) ... this income source was not tackled. Instead new taxes and less government spending will affect the "common people". And, by proxy, maybe also the tourist.

Here is my run-down of measures taken that may have an impact upon the traveller:

Value Added Tax

Frontloading the good news - the Irish government has not repeated the idiotic decision to squeeze more out of everyone by raising the Value Added Tax (VAT, which non-EU visitors may claim back anyway). While the premium rate stays high at 23%, at least it did not rise. Good news for the tourism sector: the special low VAT rate of 9%, introduced in 2011, will stay on for 2013. As Minister Noonan pointed out in his speech at Leinster House it would have been very counter-productive to hike this rate up again just in time for the Gathering 2013.

Taxes Related to House and Home

Here comes the whopper - a bunch of taxes that will make living in Ireland more expensive have been raised, added or announced. In detail they are:

  • Property Tax - newly introduced at a rate of at least 0.18% of the current property value (higher for "trophy properties"), making a few hundred Euros payable to the state in future. It is expected that dastardly landlords will pass this tax on top their poor tenants via raised rents. Which is only logical. For the tourist the price of accommodation in family-run B&Bs may be up for a rise.
  • Carbon Tax - this will be extended to solid fuels (again a somewhat logical step), making heating a home with coal etc. more expensive. Tourists are unlikely to be affected in a major way, though the romantic open fire may become smaller in many places.
  • The announced (but nor finalised) introduction of Water Charges and (in rural areas) additional Septic Tank Charges may have a negative effect on accommodation prices as well - but this is for the coming years.

Taxes Related to Motoring in Ireland

Again good news first - the government has resisted to make a fast buck by slapping on even more fuel taxes, a staple of budgets past. So no rises to petrol and diesel prices on that account. Indeed, the haulage industry will benefit from diesel tax rebates from mid-2013. This, in theory, should lead to lower haulage fees and thus lower consumer prices ... but I wouldn't hold my breath.

Car owners will, however, feel the squeeze through higher motor taxes. This will make the pure existence of a car on Irish roads more expensive and hit the tourist through rental car charges, I presume.

More and Less for the Common Man

Irish households will be facing a number of adjustments in the coming year, from more PRSI (pay-related social insurance) payments and higher education fees to less handouts for the new school term and lower child benefit. As people are trying to make ends meet, those in a position to do so will try to make up this shortfall in family finances through charging more ... again B&Bs and other small family businesses may target the tourist. Not necessarily out of greed, but often out of need.

Sin Taxes

Want to have a smoke and a drink? Hope you can pay for them ... as the government has decided that "sin taxes" are the way to go (again). The already high price of smoking in Ireland will rise, extra taxes are levied on cigarettes and (an even heftier sum) on tobacco. With alcoholic drinks you can expect the price of a pint of beer or cider or a glass of spirits to have risen by ten Eurocents over night (literally). If you are a wine drinker, better sit down: a bottle of it will now cost you an extra € 1. Yes, even the cheapest wine in Lidl and Aldi will take this leap.

As usual, theses "sin taxes" were accompanied by a lot of talk about the negative effects of alcohol and tobacco and the health benefits a lower consumption due to higher prices would bring. Call me cynical, but this is just driving people to shop in Northern Ireland (where booze was still cheaper despite a strong Pound Sterling) or from dodgy suppliers at dark corners. Smuggling will become a lucrative business ...

The Verdict ... Overall Price Increases?

Having said all that ... will a holiday in Ireland become automatically more expensive? Having been known for some high prices already, the Emerald Isle could well rearrange its finances and priorities and provide the same value for money in 2013.

If you are travelling Ireland on a budget, through choice or necessity, it will become more important than ever to shop around. If you are a Goody Two Shoes and (in the immortal words of Adam Ant) don't drink, don't smoke, the price hike should be negligable. Especially if the supliers, from B&B owners to car rental companies, react sensibly.

We'll see ...

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