A MONTH AGO, Public Expenditure Minister Paschal Donohoe rejected calls to restore the 9% VAT for hospitality, but one day out from the budget and it appears to be up for discussion.
Enterprise Minister Peter Burke has been pushing for the 9% rate to be reintroduced for certain hospitality businesses. The previous 13.5% rate was reinstated last August, despite the sector’s opposition.
It is understood the minister wants accommodation businesses to be excluded from the any reduced VAT rate and for the reduced rate to only apply to restaurants, bars and hairdressers.
Such an idea was floated ahead of last year’s budget, however it is believed the Revenue Commissioners said it would be too complicated to separate the two sectors.
Fianna Fáil sources state that such a measure was not included in the published Summer Economic Statement, adding that any such last minute move would be complicated and cost a lot of money.
Fine Gael sources state while discussions are “ongoing”, currently where the talks are at, it appears “unlikely” that the VAT rate will reduced.
Adrian Cummins from the Restaurant Associations of Ireland (RAI) told The Journal that his understanding from speaking to senior officials is that the matter is still being deliberated and no decision has been reached.
He said there is “no excuse” for the government not to deliver on what the hospitality needs to survive, stating that the country is “awash with money”.
He said if the measure goes ahead, his understanding is restaurants and hotels will be decoupled.
Speaking to Newstalk Breakfast today, Enterprise Minister Peter Burke said the government understands that the most vulnerable sectors are hospitality and retail.
He said that is the sector where three quarters of minimum wage workers are, stating there is a need for government to intervene to assist those businesses.
“I’m very focused on that, and I’m still working [and] trying to ensure that we have a very strong response to that sector,” he said.
“I think it is no secret my views on the issue,” said Burke.
In July, the Department of Finance pushed back hard against the restoration of the 9% VAT rate, stating in budget advisory papers that there are a “number of reasons” why going back to 9% “remains unjustified”.
It listed the cost to the state, the resilience of the domestic economy, and Ireland’s current position as being “not significantly out of line with other EU countries in relation to the application of VAT in this sector” as among the reasons.
“The cost is very significant. For instance the cost of a further temporary VAT reduction to 9% for a full year is estimated to be €764 million,” it said.
It said that even if measure were restricted to food and catering services, it would still have an estimated full year cost of €545 million.
Restaurants and cafes have said they struggling with higher business costs and in some cases reduced demand exacerbated by the increased cost of living, with many in the industry perceiving the reinstated higher VAT rate as a significant pressure on their businesses.
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