VAT Rate Cut to 9% for Hospitality Not Expected to Lower Customer Prices

Tánaiste Simon Harris and Minister for Enterprise Peter Burke stated that restaurants and other businesses benefiting from a permanent VAT rate reduction from 13.5% to 9% on food, effective Tuesday, are not expected to pass the cut on to customers. This measure, also applying to hairdressing, aims to bolster business viability by addressing unsustainable profit margins, not to reduce consumer prices.

Burke clarified that this is a «viability measure» to support businesses facing extraordinary costs, with potential for future positive pricing impact through increased competition. This contrasts with Taoiseach Micheál Martin's October statement, where he expected any VAT cut to be reflected in consumer prices. The Irish Fiscal Advisory Council previously found VAT increases were more widely passed on than cuts.

The VAT change, costing €681 million next year, has drawn criticism. Harris, also Minister for Finance, defended the cut as «the right thing to do» to reduce business costs for thousands in hospitality, tourism, and hairdressing sectors, noting that despite being busy, many businesses struggle with profitability. The government decided 9% is the appropriate permanent VAT rate for this sector.