2026-06-25

10. Deputy Ged Nash asked the Tánaiste and Minister for Finance for an assessment of the full-year cost in 2027 of the reduction in VAT for the hospitality sector to 9%; and if he will make a statement on the matter. [48323/26]

The hospitality VAT rate cut will be introduced from 1 July, next Wednesday. Of course, we all know that for every tax cut there is a consequent cost for the taxpayer. Can the Tánaiste put on the record of the House his assessment of the full-year of this particular VAT cut?

As the Deputy will be aware, the 9% VAT rate will be reintroduced for hairdressing services and for restaurant and catering services in the food-related hospitality sector from 1 July 2026. We have different views on this. I am very pleased that this is happening. The decision reflects the Government's commitment to supporting employment in sectors that are highly labour-intensive and form a key part of the domestic economy. I am aware the Deputy and I have different views on it. In my view, it reflects a need that has been recognised in the programme for Government to support SMEs, especially those in the retail, tourism and hospitality sectors. The programme for Government notes the increased cost pressures on these sectors and states that the Government will bring forward measures that will entail changes to VAT. The vast majority of businesses within this sector are small businesses. They are spread across the whole State. All of these businesses employ people whose jobs I and the Government are trying to protect and sustain in the time ahead and the most important thing at the moment in the global environment we live in is to protect and retain those jobs. The available Central Statistics Office, CSO, data for the food and catering and accommodation sectors indicate that over 99% are SMEs with over half of those businesses being microenterprises with less than ten employees. The estimated full year cost for 2027 of the 9% VAT rate being applied to food and catering services is €633 million. The estimated cost of the hairdressing element is a further €48 million. The total full-year cost, to answer Deputy Nash's question, is estimated to be €681 million. In making any decision in relation to VAT rates or other taxation measures, the Government must balance the costs of the measures against their impact. As outlined in last year's budget, the objective of the measure is to try to support businesses in services sectors, such as hospitality, who are facing increased cost pressures - they are even more increased now than at the time of the last budget. This measure is expected to support them and over 150,000 jobs they support and sustain across the country.

The Tánaiste knows well and acknowledged that we have a difference of opinion on the best way in which we can support those jobs. I firmly believe, and I stand over the position, that this is not the best way to do that and is not the best way to allocate finite public resources in terms of supporting the subsectors of that sector that we are all concerned, that is, the small microenterprises that keep our towns and villages across the country going. In the Labour Party's view, the best way to do that is to target supports from the perspective of energy supports, training, staff retention and, indeed, a wholesale analysis and review of the commercial rates sector. We believe that is the best way to support those companies that we are all concerned about. Of course, there is a consequence for every decision that we take. There was a limited amount of resources available for a tax package last year, and there will be this year and going forward. The impact of making this decision last year meant that there was no indexation of personal tax rates, bands and credits and the Tánaiste has put on the record that is something he wants to address this year. That comes, of course, at a cost too.

While I vehemently disagree with the Deputy on this, and he vehemently disagrees with me on my position on it, I do not doubt his bona fides on it. Nobody, neither nor the Deputy, is suggesting that we have a monopoly on trying to support jobs. The Deputy wants to do it as do I. We all want to sustain employment. I accept that point but we have a difference of view on how to go about it. I am very blunt and honest about this. I campaigned in an election and I stood in cafés, restaurants and hairdressers and I told people that if they voted for me and put my party back in government, we would pursue this measure, as did my coalition colleagues. We are now pursuing the measure. That is important. There is a democratic link, I suppose, to the programme that we offered people in the general election and the composition of this Government as well. There is a cost. There is a cost to everything the Government does. There is a cost to not doing things too. I cannot misrepresent the previous budget. In fairness, we did not know about the war in Iran at the time of the previous budget but the pressure on these businesses has got even higher since then. The certainty we can provide the café owner, the restaurant owner and the hairdresser in our constituencies and communities that their VAT bill will, effectively, be permanently reduced from next week will, I genuinely believe, be a welcome relief to many of them.

Of course it will, and who would not want free money? However, that does not address the structural problems we have in the hospitality sector. We had a VAT rate cut of one form or another in place for the vast majority of the past 15 or 16 years. In fact, the Labour Party helped to introduce that back in 2011 to ensure we could generate some jobs in a sector that could quickly add them, and it absolutely did, as the evidence suggests. However, notwithstanding that there are subsets of the hospitality sector that are in difficulty, there is always churn in the sector more broadly. That is not me being callous about it; that is the reality of business. We cannot continue to permanently support the bottom line of every business. This is a place where we need to have hard conversations with businesses and workers about the finite resources we have. Is this the best way to use the resources we have? We will have little change out of €2.5 billion between now and 2030 from this VAT cut. My only concern is whether this is the best use of public resources, given this is a sector that all the evidence suggests is, thankfully, adding jobs, not losing them.

The Deputy would not be doing his job if he was not scrutinising the decisions we make; that is his job. I believe it is a good use of taxpayers' money because the cost of this needs to be seen alongside the amount of income tax and other taxes these businesses and their employees are going to create. When I go back to my community and constituency and go into the local café, I know they will feel some sense of relief that some Bill is coming down the line. What annoyed me a lot about the 9% VAT rate in the recent period, though not nearly as much as it annoyed people in the hospitality sector, was this constant annual anxiety of whether the Government would roll it over for another year. At least, we are providing certainty now for a landscape. I believe this is the appropriate rate at which VAT should be levied in these sectors. There is much talk about the hospitality sector. Hairdressing probably does not get mentioned as much, but it is also an important cost base. There are lots of people working in these sectors, including part time, and there will be lots of young people getting summer jobs working in them as well. The hospitality sector, by which I do not mean hairdressers, is disproportionately represented in rural communities and the CSO data shows that those are overwhelmingly SMEs. The Deputy and I have a difference of view, although there may not be any differences between us about where we want to get to. That is my position.