Hiking the hospitality VAT rate ahead of the summer would only feed inflation, the Finance Minister has warned.
Minister Michael McGrath was speaking as Cabinet prepares to discuss changes to the State cost-of-living supports.
Last night, Government leaders agreed on a €400m social welfare package that will include a one-off €100 child benefit payment and an extra €100 for the back-to-school allowance.
Meanwhile, the 9% VAT rate on the hospitality sector is being extended until the end of the summer – despite speculation it would be immediately increased to 13.5%.
Cuts to the excise rate on fuel are set to be gradually phased out to ensure there is not a surge in prices at the pump.
'Ultimately, it's a tax on consumers'
Hiking the #hospitality #VAT rate ahead of the summer would only feed inflation - Finance Minister @MMcGrathTD. pic.twitter.com/OolVJ4Z3zM
— NewstalkFM (@NewstalkFM) February 21, 2023
Speaking on his way into Cabinet, Minister McGrath said hospitality VAT is “ultimately a tax on consumers”.
“In relation to the tourism and hospitality sector – and of course that 9% rate applies to hairdressers, cinemas and theatres – ultimately it is a tax on consumers.
“It is the last thing added to a person’s bill and our focus now as a government is to get inflation down.
“Inflation is falling and were we to make a decision now to allow that to go back up immediately, it would actually add to inflation and would take prices in the opposite direction to where we want to bring them.
That, for me, was a key consideration.”
Minister McGrath also confirmed that there would be no cliff-edge end to supports such as cuts to excise duties on fuel – noting that ending the measure would see an immediate 23C increase in the price of petrol.
He defended the decision not to introduce more longer-term solutions, noting that the advice consistently has been that we should use temporary and targeted supports.
