Restaurants have hailed news that its VAT rate is to return to 9% as “common sense”. 

During the pandemic, VAT for the hospitality sector was cut from 13.5% to 9%, as it struggled to cope with the chaos of COVID restrictions. 

In 2023, the VAT returned to 13.5% and many restaurants found their businesses suddenly became loss making. 

This week, Finance Minister Paschal Donohoe announced that Budget 2026 would see the VAT rate for hospitality once again return to 9% - at an estimated cost of €1 billion to the exchequer. 

On Lunchtime Live, Sligo restaurant owner Anthony Gray said he thought it was only “fair” to reduce taxes on hospitality. 

“The Tánaiste Simon Harris, he came out and gave a solemn commitment that he would reduce the VAT rate to 9%,” he explained. 

“He’s realised that up and down the length and breadth of this country that rural Ireland is struggling, businesses are struggling. 

“The VAT rate, when it went up to 13.5% [caused] 90% of the closures in the restaurant and hospitality industry. 

“So, common sense has prevailed here.”

A young waiter takes an order from a couple at a restaurant. Image: Andriy Popov / Alamy Stock Photo

Mr Gray continued that he suspected that the €1 billion cost of the tax would likely prove to be an overestimation. 

“We’ve calculated it out and it actually works out as €545 million,” he argued. 

“So, the figure there, I think, is a bit skewed.” 

Mr Gray added that the exchequer is currently “awash with money” and the tax cut could end up creating jobs. 

“Every little small town and rural village in Ireland has restaurants in it,” he said. 

“They’ve been struggling; we are waiting and hanging on with our finger nails for the 9% to be re-instated. 

“When it was reinstated back, we created 30,000 jobs. 

“So, don’t tax us out of oblivion.” 

Main image: A restaurant in County Limerick. Picture by: Alamy.com.