
VAT Reform and ‘Gathering 2’
The partners in the proposed incoming Government will introduce changes in VAT and PRSI, plus “other measures” to assist the retail and hospitality sectors, according to the “Programme for Government” which they have agreed.
Despite intense speculation that a 9% VAT on “food hospitality”, hairdressing and entertainment will be introduced the next Budget, the published Programme makes no specific commitment to this change.
It says:
“The Government will bring forward measures to support SMEs, in particular the retail and hospitality sectors, acknowledging the increased cost pressures on these sectors, and this will entail changes to VAT, PRSI and other measures. These measures will be implemented as part of the normal budget process.”
During the General Election campaign, Fine Gael favoured a new VAT rate of 11% for a range of services, while Fianna Fail suggested new supports for sectors facing difficulty. Some estimates indicate that a 9% concessionary VAT rate would cost the Exchequer between €70m and €85m per annum.
In relation to Tourism development, the Programme promises an initiative to attract the Irish Diaspora to holiday here. The plan is similar to “The Gathering” campaign of a decade ago.
Responding to the Programme, the Irish Hotels Federation welcomed the VAT and PRSI commitments. President Michael Magner said:
“A decision to reduce the rate of VAT for food service businesses would be a very welcome development. It would greatly assist the many vulnerable food-led businesses that have faced an uncertain future and escalating cost challenges in recent years. This would be an important step toward putting these businesses on a more stable footing.”
Adrian Cummins, CEO of the RAI and a candidate in the current Seanad election, also welcomed the proposed reforms but urged the new Government to request the Revenue Commissioners to be lenient with SMEs who are finding difficulty in repaying debt which has been “warehoused” since the Covid pandemic.