Hoteliers and retailers push back on possible VAT cut delay

Hoteliers and the retail industry have pushed back on a possible delay in the reintroduction of the 9 per cent VAT rate for hospitality, calling claims that it would cost €1 billion “misleading.”

Tax Strategy Group papers published on Thursday showed that reducing the VAT rate for food and drink, and accommodation at the next budget would cost the exchequer about €800 million, while the Government is thought to be considering holding back the reduction until the middle of next year. Extending the cut to food and drink only would likely cost about €675 million, the papers show.

“In the lead up to the general election and afterwards, discussions between hospitality representative bodies and the Government have always been on the basis that any VAT reduction would apply to hospitality food services only and not accommodation services,” Irish Hotels Federation chief executive Paul Gallagher said in a statement. “To suggest anything else was on the table is disingenuous.”

Mr Gallagher’s comments underline the depth of feeling within the industry on the VAT matter, even as some Government politicians express opposition to the move. While Minister for Enterprise Peter Burke has pledged to restore the rate, Niall Collins, Minister of State at the Department of Justice has warned extending the rate for luxury hotels would sit “very, very uncomfortably with me”.

‘These are huge, huge costs and we don’t sell gold bars, we sell food,’ says Kinara restaurant co-founder

Spending on infrastructure makes sense, cutting VAT on hospitality is quite mad

Will I pay tax in Ireland if a US relative leaves me something in their will?

EU-US tariffs deal at 15% preferable to ‘ruinous’ trade war, says Taoiseach

[ Income tax dilemma for Government as VAT cuts could cost €1bnOpens in new window ]

“The Government’s narrative has had the effect, intended or otherwise, of driving a wedge between the public and the hospitality industry, framing the VAT reduction as a giveaway to businesses. This is extremely divisive and simply not true,” Mr Gallagher said. “The 9 per cent VAT reduction sought would apply to prepared food services, such as meals in restaurants, takeaways, commercial kitchens and food served on transport.”

Mr Gallagher’s comments came as industry group Retail Excellence Ireland (REI) urged the Government not to delay reinstating the VAT cut.

[ Government likely to delay VAT reduction for hospitality sector until mid-2026Opens in new window ]

“The retail and hospitality industries work hand in glove to provide a world-class consumer experience in Ireland,” REI chief executive Jean McCabe said in a statement. “However, both industries have been severely impacted in recent years by the rising business costs, and numerous business owners have been forced to close their doors after unsustainable financial pressure.

“The VAT rate for hospitality must be cut in Budget 2026 as promised,” Ms McCabe said, adding that the general rate should be reduced to 21 per cent from 23 per cent to support other retailers.