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Tourists to Ireland won’t be hit by the VAT rate increase proposed by Minister for Finance Michael Noonan as the Dublin government looks to cut $5billion in next month’s budget.

Fine Gael Minister for Transport and Tourism Leo Varadkar has confirmed that the nine per cent VAT rate on all tourism products will not be affected by the forthcoming budget.

Varadkar introduced the lower VAT rate for restaurants, hotels and leisure services when he took office after the February elections.

The move was welcomed by tourists and industry bosses alike but there were concerns that it could become a live issue in next month’s budget.

Speaking at a Good Food Ireland conference, Varadkar confirmed that the nine per cent VAT rate on tourism products will not change as it benefits local businesses.

“The Government introduced the lower VAT rate of 9pc earlier this year in the Jobs Initiative,” said Minister Varadkar.

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“This rate is significant because it principally benefits home-grown employers which are based in Ireland.

“The vast majority of these businesses are Irish-owned and their profits stay in the country. The low rate has helped boost the tourism industry.

“Many operators moved quickly to pass the VAT cut on to their customers following its introduction. Even where the rate was not passed on, it still benefited the tourism industry by helping businesses to expand their operations or take on additional staff.”