The Government is weighing up whether to postpone a planned VAT cut for the hospitality industry until the middle of next year, reports RTE.
The move is reportedly aimed at freeing up financial space to allow for further tax reductions in next October’s budget.
A promise to lower VAT for the hospitality sector — expected to cost around €1 billion — is part of the Coalition’s Programme for Government, reports RTE.
During the Covid-19 crisis, the VAT rate for hospitality was temporarily dropped from 13.5% to 9%.
Finance Minister Paschal Donohoe stated last Tuesday that the proposed VAT change would represent about two-thirds of the tax cuts allocated for this year, reports RTE.
Officials are now exploring the possibility of deferring the reduction until 1 July 2026, as initially reported by the Irish Times.
There is also ongoing consideration around whether the reduced 9% VAT rate could be applied solely to hospitality, excluding the accommodation industry.
At this stage, no final decision has been made on either proposal, reports RTE.
Minister of State at the Department of Justice and Fianna Fáil TD for Limerick County, Niall Collins, expressed concern that a broad VAT cut across hospitality may not be well-targeted. He indicated a preference for more focused measures across specific sectors.
Speaking on RTÉ’s Today with Philip Boucher Hayes, he acknowledged the strain on the hospitality industry and the importance of job protection, adding that the Programme for Government clearly addresses the needs of the sector, alongside SMEs and retail, reports RTE.
He also suggested there’s room for tax relief in the broader tax package and said the Government is expected to advance measures such as adjustments to VAT, PRSI, and other tools.
He stressed that slashing VAT from 13.5% to 9% would be a significant financial burden in a single move and emphasized that no agreement has been reached on this yet, reports RTE.
He noted that the negotiation and decision-making process will involve compromises and discussions, and that the Government is only beginning that journey.
Minister Collins emphasized that the main focus is to assist those most in need, particularly young people and vulnerable groups, including individuals with disabilities, reports RTE.
He also recalled that past VAT reductions for hospitality did not result in benefits being passed on to consumers, as was intended.
He reaffirmed his support for long-term backing of hospitality, SMEs, and retail, but questioned whether it can be implemented effectively.
He mentioned that while there is consensus within the Government about the need to protect at-risk jobs, some commentary around the VAT debate has been inaccurate, reports RTE.
Pat Crotty, CEO of the Vintners Federation of Ireland, argued that unless Government support for the hospitality industry changes, more pubs will be forced to shut permanently.
Appearing on the same programme, he acknowledged that not every hospitality business requires aid, but noted stark differences in the ability to operate profitably based on geographic location, reports RTE.
Mr Crotty pointed out that drink and meal prices are much lower in rural areas than in Dublin, and while some busy pubs are just managing to stay afloat, many establishments are operating at a loss.
“A lot of businesses are vulnerable,” he said, reports RTE.
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