The Government should scrap a looming VAT cut for the hospitality sector as the industry has “bounced back very strongly” from the pandemic, an economist has argued.
As COVID sent the economy into a sudden recession back in 2020, the Government cut the VAT rate for the hospitality rate to 9%, returning it to 13.5% in 2023 once restrictions eased.
Last year, however, following sustained lobbying by the industry, the Government announced the rate would return once again to 9% in the summer of 2026.
On The Claire Byrne Show, Assistant Professor of Economics at Trinity College Barra Roantree said the cut is completely unnecessary.
“They should have never bought the arguments from the hospitality sector in the first place,” he argued.
“We've seen that the insolvencies are actually down on last year, but whenever insolvencies were mentioned, the hospitality lobby groups never mentioned and restaurants lobby groups never mentioned that there were actually 11 new companies being formed for every one that was closing.
“So, it was never the case that there was this tsunami of closures because there were much more restaurants opening than there were closing.”
Professor Roantree conceded the hospitality industry endured a difficult few years during the pandemic, but added they have “bounced back very strongly” since then.
“They were not facing into lots of job losses,” he said.
“But instead, their lobbyists managed to convince the Government that they needed a €700 million tax cut this year on top of the €2 billion in tax expenditures and reduced tax rates that they already received.
"Because 13.5% is a lot less than 23% that's paid on most goods and services.”
A restaurant in Dublin,. Picture by: noel bennett / Alamy.Also on the programme, Sligo restaurateur Anthony Gray said the 9% VAT rate has “helped us to hang on” over the years and its return is “very welcome”.
He added that many small independent traders are still struggling.
“We fought hard to get the VAT rate to 9%,” he said.
“There are closures left, right and centre all over Ireland and especially in rural Ireland.
“The hospitality industry and, indeed, Ireland rely on restaurants - we are one of the biggest indigenous employers in the country.”
Main image: A restaurant in Limerick. Picture by: Alamy.com.
