The reduced VAT rate of 9% for tourism, hotels and some other services will end at midnight and revert to 13.5%, reports RTE.
The planned increase will be implemented despite last-minute appeals from business organizations to maintain it.
The government last raised the low rate in February.
After an economic assessment by government officials, it was decided that there was no economic basis for further expansion.
Since then, government ministers have consistently ruled out raising the low rate further because it is considered regressive and costly.
It is estimated that the extension to date will cost the Treasury €300 million in lost tax revenue.
However, last week Ibec called for it to be maintained, warning that the increase, combined with other upcoming cost increases for businesses, would put additional financial pressure on companies, reports RTE.
Ibec claims it has played a key role in sustaining businesses and a significant number of more than 300,000 jobs in the experience economy, worth €4 billion a year.
Associations representing hairdressers and restaurant owners also warn that the rate hike will push some entrepreneurs out of the market.
The Irish Restaurant Association described the move as “nonsensical” and will see many low-margin food restaurants, cafes and pubs close their doors across the state, reports RTE.
“The increase is wrong at a time when the country needs to reduce inflation, a vat increase only adds to inflation. Government need to restore the 9% Vat for Food related Hospitality businesses in Budget 2024 and we will me making the case for this when we meet with the Minister for Finance next week. The increase the vat rate is the final nail in the coffin for many small cafes, restaurants and food led pubs,” said Adrian Cummins, Chief Executive of the Restaurants Association of Ireland, reports RTE.
“We are very disappointed that the Government has decided to add to inflation with this unnecessary increase in taxation on food. The 9% VAT rate on food purchased in hospitality settings was at the right level, both from the point of view of domestic consumers and attracting tourism. By moving ahead with the VAT rise, we will effectively see menus changed across the country so the Government can collect additional taxation from the public – heaping further pressure on already hard-pressed consumers,” said Donall O’Keeffe, Chief Executive of the LVA, reports RTE.
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