VAT Cut for Irish Hospitality: Some Restaurants Reduce Prices, Most Absorb Costs

Ireland has reduced the VAT rate for food hospitality businesses and hairdressers from 13.5% to 9% this week. While some establishments are passing on savings, most are expected to absorb the cut to improve their margins amid high operating costs.

In Dublin, Dax restaurant lowered a two-course lunch from €53 to €50 and a four-course dinner from €98 to €94. Lolly and Cooks cafe also announced lower coffee prices, and Savoir Fare in Westport, Co Mayo, will pass on reductions. However, this is not a widespread trend.

Tír, a seasonal Irish deli with two Dublin outlets, explained that an €11.75 sandwich, which resulted in a 29 cent loss at the old VAT rate, would yield a 14 cent profit at the new 9% rate. Co-owner Shane Kelly called the new rate «breathing room» for independent food businesses facing immense cost pressures.

Enterprise Minister Peter Burke described the VAT cut as a «viability measure to shore up businesses that have been experiencing extraordinary costs,» rather than a direct consumer benefit. The Irish Fiscal Advisory Council previously found that hospitality businesses tend to pass on VAT increases but retain a higher proportion of reductions. Economist Dermot O’Leary of Goodbody does not expect many restaurants to pass on this cut, stating, «In the majority of cases, consumers will not feel it.» He also noted that the blanket measure benefits all operators, including those not struggling, and some struggling businesses may have deeper issues unrelated to VAT.