VAT Rate Restoration Debate Ahead of Budget Day

September 7, 2025 Victoria Sterling -Business Editor Business

Summary of the Article: VAT rate Debate for the ⁤Hospitality ‌Sector in Ireland

This⁤ article presents a debate regarding‍ a potential VAT rate cut for the hospitality sector in Ireland. It features contrasting⁣ viewpoints from ⁣Professor Martina ‌Lawless, ‍Director ‌of the ESRI (Economic and Social‌ Research Institute), and Adrian Cummins, chief of the RAI (Restaurants Association of Ireland).

Professor Lawless argues against a blanket VAT rate cut, believing it’s an inefficient ⁣use of taxpayer money.Her key points are:

Benefit is diluted: The majority of the benefit will go to large operators, not ‌struggling small businesses.
 Targeted measures are better: Focusing on energy costs or local rates, tailored ⁢to business size and location, would⁣ be more effective.
Sector churn is high: The hospitality sector naturally experiences a high rate of business openings and closures, making it challenging to assess the true impact of closures. Lack of evidence: There isn’t strong evidence that a blanket cut⁣ will effectively support the sector.

Adrian Cummins ‍argues for a VAT rate reduction to 9%, stating it’s crucial for the survival of the industry. His key points​ are:

Fighting chance: ⁣A reduced VAT rate will give the sector a chance to survive.
 small businesses dominate: The vast majority ​(76.6%)⁢ of hospitality businesses are small, employing 1-9 people. Large chains represent only 0.4% of the sector.
extreme pressure ⁣on margins: Small businesses are facing meaningful cost pressures from energy, food inflation, minimum wage ⁣increases,⁢ and sick pay changes. Urgency: Businesses cannot wait ‍until July for a potential cut; some won’t survive that ‍long.
*​ Passing on ‍savings: While​ not guaranteed, businesses will determine if they can pass the savings onto customers.

The article also briefly touches on the question of weather reduced ⁢VAT will translate to lower prices for consumers, noting that it⁣ will depend⁢ on individual businesses⁣ and their margins. it also mentions the potential​ inclusion of accommodation in any VAT rate changes.