Minister for Tourism Peter Burke might have been a bit puzzled reading Fáilte Ireland’s inaugural quarterly economic report before its publication this week.
For at least the past two years, the Fine Gael Minister has had hospitality lobbyists in his ear telling him that the sky was falling in on the Republic’s tourism and hospitality businesses, due to high costs and, last year, a decline in visitor numbers.
As a consequence, Burke pushed at Cabinet to reduce the VAT rate for the sector from 13.5 per cent to 9 per cent from July 2026. His efforts fell short in Budget 2025 but succeeded last year.
It’s not that the lobbyists behind this push pulled the wool over his eyes, exactly. It’s just that if the sector really is “on its knees”, as Restaurants Association of Ireland boss Adrian Cummins put it, there is little evidence for it in the Fáilte Ireland data.
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The document itself isn’t exactly earth-shattering. It compiles previously reported Central Statistics Office figures, revealing a 3 per cent decline in overseas visitor numbers last year after a dismal start, along with a 9 per cent dip in visitor spend.
Overall, however, the findings are “encouraging”, as Burke himself said in the report’s introduction. Hotel operators, whose profit margins on food will be bolstered by the VAT reduction, were able to increase their prices by an average of 3 per cent last year. Meanwhile, a large plurality – 48 per cent – of tourism businesses said their revenues increased in 2025. Almost half of the food and drink operators surveyed said the same, but more than half said their margins had shrunk compared to 2024.
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No one is under any illusions about the challenges, particularly on the cost side, that Irish businesses – across all sectors – have faced over the past few years. The problem with the VAT rate measure is that it’s like a prescription for decapitation to cure a head cold. Not only is it hugely costly to the exchequer – €232 million in 2026 and €681 million for a full year – at a time when better uses could surely be found for the money. But also, as Cantillon and others have noted before, it fails to distinguish between squeezed small operators and mega-brand multinationals like fast food giant McDonald’s and Ireland’s biggest hotel chain, Dalata.
Despite everything that’s happening in the world, the Coalition reportedly remains committed to introducing the cut in July. With the global economy going to hell in a handcart, Burke is probably praying he won’t be left holding the bag if spending priorities have to be juggled.
