VAT Cut in the Balance
The promised permanent introduction of a 9% VAT rate on hospitality services in Budget 2025 hangs in the balance as Government politicians drop strong hints that it might be delayed until mid-2026.
Ministers are also said to be assessing if it is possible that the lower VAT rate of 9% would be extended only to hospitality and not to the accommodation sector.
At issue is the amount of tax income reduction that would result from the move and a desire to also meet demand for tax cuts and additional spending from a range of Government departments. Differences have also emerged regarding the overall cost of the VAT concession, with some Ministers estimating that it would be in excess of €800m in a full year. Earlier estimates, however, put the cost at less than €500m.
The Programme for Government contains a commitment to reduce VAT on the hospitality sector, at a cost of around €1 billion.
Minister for Finance Paschal Donohoe said that the measure would account for two-thirds of the allocation of identified tax cuts this year.
Minister of State at the Department of Justice and Fianna Fáil TD for Limerick County Niall Collins said that across-the-board reduction in VAT for the hospitality sector is not targeted, while he would prefer to see targeted interventions in a number of sectors.
He said that going from 13.5% to 9% VAT would be an enormous cost in one jump, and it was not the case that this has been agreed already.
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