New taxes are never popular, which generally means that in times of fiscal need governments tend to rely on increasing existing ones, particularly income tax. And so it is not surprising that proposals from the Dublin local authorities for a tax on tourist accommodation is proving controversial .Dublin City Council and Fingal and South Dublin county councils have all signed up to a proposed working group to bring forward proposals on this issue, while Dún Laoghaire Rathdown is thought to be close to doing so.
The plan is driven by a desire by the councils to get another source of revenue which they can control. They can currently set the level of commercial rates and have some flexibility on local property tax bills, but rely for the bulk of their revenue on funds from the central exchequer.
The tourist sector is, predictably, objecting and Government ministers are nervous. Tánaiste Simon Harris has said that with the tourism sector going through a difficult period, now may not be the time for such a move. As the move needs legislation, the Government will have to be on board.
Without knowing the likely scale of such a tax, it is hard to judge the likely impact. However, many other European cities have a similar charge, on the basis that it is reasonable to ask tourists to contribute to the facilities they use. Many also have local authorities which have wider revenue-raising powers and more power to manage their cities.
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Irish local government, on the other hand, is overly-reliant on central funds though – it must be said – few councils have used the flexibility available to them to raise local property tax above its base level, with many choosing to reduce it. This flexibility has now been increased in the latest reform of the tax announced recently.
Ireland has managed to avoid the issue of new taxation in recent years, due to the strength of corporate tax. But with this source of revenue under threat and big bills coming down the tracks from an ageing population and the climate transition, a small additional tax on tourists will be a minor consideration in the choices we will face.
