Faint Hope for 9% VAT Extension

Representatives of the hospitality industry were given a non-committal response on the retention  of 9% VAT when they met with the Minister for Finance, Michael McGrath.

While the meeting was described as a "listening exercise", the Department of Finance is said to be keen to end the tax break. Taoiseach Leo Varadkar said, however, that there will be further meetings this week in relation to the hospitality VAT rate, involving the key ministers of finance, public expenditure, social protection and the party leaders.

After the meeting, the Restaurants Association of Ireland (RAI) said there was "no indication" if the VAT rate would remain at 9% or return to 13.5%. In a statement, the RAI said:

"Ministers McGrath and Donohue met with representatives of the hospitality sector. They listened to the concerns of industry representatives who advocated for the retention of the 9% VAT rate for hospitality. There was no indication if it would increase or remain at 9%. The industry is hopeful the ministers will keep the rate at 9% to protect low-margin businesses like restaurants, pubs and cafes."

A cabinet sub-committee meeting tomorrow (Thursday) is expected to consider the future of the various cost-of-living supports, including the reduced VAT rate, with decisions being taken by the full Cabinet the following week. The 9% VAT rate for the industry is due to expire at the end of the month, when it will revert to 13.5%.

Sinn Féin Spokesperson on Finance Pearse Doherty said the party would support the end of the 9% VAT rate if jobs will be protected.

President of the Irish Hotels Federation Denyse Campbell said the 13.5% rate is the third highest VAT rate in Europe, and it is important that the 9% rate is retained.

"We expressed our concerns that the Government is considering increasing the VAT rate for tourism and hospitality," she said.

"The prospects for 2023 are looking very different to last year. Unlike in 2022, there is no longer any significant pent-up demand or displaced business carried over from during the pandemic. Instead, we are now facing significant economic uncertainty and very worrying headwinds over the coming 12 months, given the slowdown in the global economy. We are grappling with an ongoing cost-of-living crisis, exceptionally high inflation, soaring interest rates and very poor consumer confidence across all markets. This is at a time when our industry is facing escalating business costs with little room to manoeuvre.

"The focus of the Government should be on bedding down the recovery over the next 12 months – doing everything possible to safeguard livelihoods and the long-term prospects for our industry. Now is not the time to put tourism recovery at risk by increasing VAT."