The Restaurants Association of Ireland (RAI), backed by new economic analysis from economist Tony Foley, has today released a detailed report advocating for the reinstatement of the 9% VAT rate for food services, pushing back against recent criticisms of the measure, reports RTE.
The RAI said it firmly rejects recent commentary questioning the benefits of reducing the VAT rate, highlighting the mounting pressures on the sector due to both market forces and government-driven cost increases. These include sharp rises in labour and input costs, which independent studies have confirmed.
According to the association, the food services industry is largely composed of small enterprises. “76.6% of hospitality businesses employ fewer than 10 people,” it noted. “Only 0.4% – just 73 out of 20,213 hospitality enterprises – are large firms or chains,” reports RTE.
Recent indicators paint a troubling picture for the sector in 2025, with food service sales volumes falling, sluggish credit availability for restaurants, and tourism-related dining underperforming.
“The sector is not booming, and margins are under extreme pressure,” the RAI stated.
The report argues that food services should also be viewed as a broader cost-of-living issue, and that restoring the 9% VAT rate is both economically sensible and strategically important, reports RTE.
Even at the reduced rate, the hospitality sector would continue to play a major role in the national economy.
Data from the CSO’s Monthly Services Index shows a drop in both the volume and value of food service sales this year, reports RTE.
Speaking at the launch, RAI CEO Adrian Cummins described the 9% VAT rate as vital for the survival of thousands of restaurants and cafés across the country.
“Businesses have built their financial planning around its promised return, and any delay or uncertainty risks undermining that planning,” Mr Cummins said, reports RTE.
“The financial model for food businesses is broken and without the reinstatement of the 9% VAT rate many just simply will not survive,” he added.
“With 99.6% of food businesses in Ireland classified as SMEs, the Government must honour its commitment to the 9% VAT rate and safeguard more than 20,000 enterprises and the 220,000 people they employ,” he continued, reports RTE.
“Only 73 of these businesses, or just 0.4%, are large companies. Supporting SMEs is critical for the sustainability of our sector and the wider economy,” he said, reports RTE.
Economist Anthony Foley, Emeritus Associate Professor at DCU and author of the economic report, underlined the sector’s importance to jobs and regional economies.
“The sector plays a significant role in both regional and national employment and economic activity,” he said. “However, its business model has been severely undermined by rising labour and input costs, much of which stem from government policies,” reports RTE.
He warned that, without support such as the 9% VAT rate, the sector faces a steep decline. “In addition, 9% VAT supports ordinary consumers as well as thousands of small enterprises,” he concluded, reports RTE.
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