Little Hospitality Joy in Budget 25

As was widely expected, there was little to cheer the hospitality industry in Budget 25. Once it became clear that the Government had agreed to ignore the intensive lobbying for a return to 9% VAT, the industry organisations were also going to feel disappointed.

And so they were.

The Restaurants Association of Ireland described the decision as a "devastating blow" to a sector already in crisis, while the Irish Hotels Federation said that “the decision not to reduce the hospitality VAT rate is short-sighted and extremely concerning given the stark commercial environment that food service businesses are operating under throughout the country”.

The Irish Tourism Industry Confederation expressed “disappointment” as did publicans bodies VFI and LVA.

RAI CEO Adrian Cummins, one of the most vocal lobbyists over recent months, said: “Since the VAT rate was increased to 13.5% in September 2023, a total of 612 restaurants, cafés, gastropubs and other food-led businesses have been forced to close permanently.”

Not only did hospitality fail in its “9%” campaign, but it also now faces higher costs through the raising of the minimum wage to €13.50.

The only good news in the Budget was the announcement of a €170m energy support scheme which will provide around €4,000 to hospitality and retail businesses, with approximately 39,000 set to benefit. The registration thresholds for VAT are also set to rise.

Tourism, however, will have more money for product development and marketing with higher allocations for Fáilte Ireland and Tourism Ireland.

It now seems that the campaign for 9% VAT has run its course. Last July, the Tax Strategy Group at the Department of Finance said that reinstating the 9% VAT rate for the tourism and hospitality sector remained “unjustified”. It warned the cost for a full year was estimated to be around €764m.

Irish Hotels Federation President Michael Magner said: 

“The half-baked measures announced today will have almost no impact for businesses that are struggling with ever-increasing costs, much of which are a direct result of the Government’s own economic policies. The bottom line is that inaction now poses an enormous risk to our wider hospitality and tourism industry which, as one of Ireland’s largest indigenous employers, supports over 280,000 livelihoods, some 70% of which are outside of Dublin.”