RESTAURANTS and cafes have been handed a financial lifeline – but pubs which don’t serve food will miss out.
Finance Minister Paschal Donohoe has flagged the hospitality VAT rate will be cut to nine per cent from January 1 2026.
Hairdressers, cinemas, events companies and food-free pubs may miss out on the financial lifeline which could see prices fall at the tills.
In the run up to the general election, Fine Gael had promised to slash VAT for the hospitality to 11 per cent with Fianna Fail opting to keep the rate at 13.5 per cent.
However, the coalition partners surprised the sector by flagging that they would reduce the VAT rate for hospitality down to nine per cent during their Government formation negotiations.
The Programme for Government does commit to changes to the VAT rate but does not nail down a figure – leading to concern among some businesses about how far the coalition will actually go.
Minister Donohoe told the Dail today: “Let me be clear that I understand the value of the nine per cent VAT rate.
“It of course is my intention to be able to deliver such a move but such a move does have a very significant cost entailed to it which is why it needs to be part of the overall budget process.
“In terms of what that VAT rate will be applicable to – my view is that it can have the biggest impact on food and catering.”
Sinn Fein’s Pearse Doherty pressed the minister on the issue as he raised concerns that the tax cut would not apply to other parts of the hospitality sector such as cinemas and events businesses.
Minister Donohoe said that reducing the rate to nine per cent for food and catering businesses alone would cost €675million per year.
CEO of the Licensed Vintners Association Donall O’Keeffe welcomed the announcement from the Minister after a “long and hard fought campaign” from the hospitality sector.
LOWER IT SOONER CALL
However, he called for the measure to be brought forward to kick in from Budget Day.
And he urged the Government to consider further measures to help pubs that don’t serve food and will be left behind by the rate cut.
He said: “Clearly the industry has been suffering due to cost of business measures imposed by the Government and if they are now taking this step to assist the sector, then the relief provided by this VAT reduction should apply as early as possible.”
He added: “There seems very little reason why the Government couldn’t allow the reduced VAT rate to take effect from the day after Budget day.
“Tax rises kick in immediately, why shouldn’t reductions? All things being equal they should seek to lower it from the Budget Day too.
“While this is obviously positive news for those pubs and hospitality businesses who serve food, it is notable that the rest of the pub trade has also experienced the same difficult, Government imposed business conditions and they will receive no relief under these proposals.
“That is why we will be pressing the Government to also reduce alcohol excise in the upcoming Budget, which remains amongst the highest levels in Europe.”
The Vintners Federation of Ireland has welcomed the announcement but raised concerns that it would not benefit pubs that do not serve food.