Ministers give no commitment to hospitality industry that 9% VAT rate will be retained

The two Ministers in charge of the State’s finances gave no indication on Monday night if they will proceed with scrapping the reduced 9 per cent VAT rate for the hospitality sector at the end of February.

Minister for Finance Michael McGrath and Minister for Public Expenditure Paschal Donohoe met representatives of the hospitality sector in Government Buildings on Monday to discuss the reduced rate, which has been in place since the Covid lockdown in 2020.

There is now growing pessimism among representatives of the sector that the rate will be adjusted upwards from March to 13 per cent.

Representatives of the restaurant and public house trades attended the meeting and outlined their concerns for employment in the industry if the rate reverts to 13 per cent after February 28th.

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The Minister spent most of the meeting listening to the concerns of representatives. They gave no indication if the rate would increase or remain at 9 per cent.

In a statement issued afterwards hospitality representatives said they were hopeful the Ministers would agree to keep the lower rate in place, as it would protect low-margin businesses like restaurants, pubs and cafes.

One solution that has been canvassed has been to make a distinction in the VAT rate between accommodation, which has experienced a surge in business since the Covid pandemic ended, and the rest of the hospitality business. Sources have said it would be difficult to make such a distinction and that it was not discussed at the meeting.

There has been growing pessimism on the retention of the rate within the sector.

The final call will be political rather than determined solely by the advice from officials. In the past week, officials have recommended that the rate be scrapped.

The Department of Finance has opposed the lower rate for some time. Officials at the Department believe there is no grounds for its continuing retention as it is no longer an emergency measure.

A Government source said last week it was “looking unlikely at this stage that it’ll be retained” – a belief mirrored by several Coalition sources who spoke privately over the weekend.

There is a growing belief that the Government will divert the estimated €400 million cost of the lower VAT rate top other priority areas, as part of its cost-of-living package.