DUBLIN, Oct 14 (Reuters) - Ireland’s move to introduce a 10 euro ($14) air travel tax will hurt the competitiveness of the country’s travel and tourism sector at a time of already tough business conditions, business groups said on Tuesday.
Finance Minister Brian Lenihan announced the move in his 2009 budget on Tuesday in a bid to shore up state coffers as Ireland slides into its first recession in 25 years.
Lenihan said it is estimated the tax, which will take effect from the end of March, will yield 95 million euros in state revenues next year and 150 million euros in a full year.
“It would be regrettable even in normal times, but its imposition at a time when the aviation and travel industries are in the most precarious position in living memory is unfortunate and unwise,” said Eamonn McKeon, Chief Executive of the Irish Tourist Industry Confederation.
“It is another blow against Ireland’s competitiveness and for the amount of money raised it could and should have been avoided,” he said.
Lenihan said passengers will pay a lower rate of two euros on shorter journeys, adding that the decision was consistent with moves by other European Union member states such as the UK and the Netherlands.
"This new tax will further damage already falling consumer demand for air travel and will put Ireland at a significant disadvantage for inbound tourism on which thousands depend for their livelihood," airline Aer Lingus AERL.I said.
Shares in the national carrier finished down nearly 2 percent while the main index .ISEQ closed 2.73 percent up.
Aer Lingus's local rival, European low cost carrier Ryanair RYA.I, had already urged the government this week not to introduce a travel tax, saying that it would discriminate against air travellers in favour of ferry passengers.
It added that short-haul traffic from Shannon in southern Ireland could collapse as a result. Aer Lingus pulled its services from Shannon earlier this year over the issue of costs.
“Ryanair simply cannot deliver up to 2 million passengers annually at Shannon if the average fares paid by these -- mainly -- visitor numbers is to be increased by more than 100 percent,” it said.
Separately, motorists are expected to be hit by increases in motor tax rates.
The tax on cars with engines below 2.5 litres will be raised by 4 percent, while vehicles with bigger engines will see a 5 percent tax rise.
But Lenihan also said he would be proposing a tax incentive to promote cycling to work. (Reporting by Jonathan Saul; Editing by Carmel Crimmins, Greg Mahlich)
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