Parties in VAT Auction

As the General Election campaign gets under way, political parties are engaged in an “auction” on the issue of VAT on hospitality services. Hotels, however, are excluded from all proposals to-date.

Fine Gael has proposed raising VAT from 9% to 11%, and putting the hospitality sector on the lower rate to ease pressures on cafes, restaurants, entertainment and hairdressers. The hospitality sector was on the lower 9% due to the Covid pandemic but is now on the higher rate of 13.5%.

Sinn Féin, the Social Democrats, Independent Ireland and Aontu all claimed that the 11% rate will not be enough assistance for a sector which has claimed that 600 restaurants have been forced to close. The three parties also criticised Fine Gael for proposing changes to help the hospitality sector only weeks after doing nothing for such businesses in Budget 2025.

Fianna Fáil said it is opposed to the measure because it claimed it would directly lead to a 2% increase in the energy bills of every business and every household in the country.

However, Fine Gael countered that its proposed 11% VAT rate would have no impact on gas and electricity prices - for either households or business. Party sources said the vast majority of businesses can claim back all of the VAT on utility bills.

Fine Gael party leader Simon Harris said the VAT measure would happen within 100 days of taking office, as the bottom line of many small and medium-sized businesses are tight.

The party said it will also introduce a temporary three-year measure to provide a PRSI rebate for businesses with fewer than 50 staff.

Minister Paschal Donohoe said hotels are excluded because “choices had to be made”, but he said that hotels would benefit from the reduction in VAT on the cost of food.

Fianna Fáil leader Micheal Martin said he was not opposed in principal to the VAT rate changes, but was concerned such a measure could increase energy prices.

Speaking at the Douglas Shopping Centre in Cork this morning, Fianna Fáil leader Micheál Martin said that the problem with Fine Gael's VAT proposal is that it has a knock-on effect for small businesses.