Government finally heeds calls for 9% VAT rate but urgent implementation is critical to prevent closures

Government finally heeds calls for 9% VAT rate but urgent implementation is critical to prevent closures

Independent Ireland leader Deputy Michael Collins TD has cautiously welcomed tentative confirmation that Budget 2026 will include a long-awaited reduction in VAT for the hospitality sector – but warned that delaying its introduction until July 2026 risks pushing many businesses to the brink.

  “This is a necessary pressure release valve for an industry that remains under immense strain,” Deputy Collins said. “But waiting until the summer of next year to bring it in may be too late for many operators.”

The planned reduction – from the current 13.5 per cent VAT rate to a lower 9 per cent – will apply to food-led hospitality and hairdressing services. While not extending to accommodation, the measure is nonetheless expected to provide some relief to cafés, restaurants, pubs and salons across the country.

  Deputy Collins said the move, if implemented swiftly, could “make the difference between survival and closure” for thousands of small and medium businesses, particularly in rural and tourism-dependent areas.

  “This so-called temporary measure has already become the economic bedrock for many local businesses,” he said. “Entire enterprises were launched during the life of the 9 per cent VAT rate – particularly across parts of Cork, Kerry, and the west coast – and they are now clinging on in the hope that some stability will be restored.”

  While topline revenues in hospitality may look healthy on paper, Collins said, the reality behind the scenes is far more precarious. “Margins have been decimated by spiralling insurance premiums, energy bills, wage demands and supply costs. Operators are keeping the lights on, but many are not taking home a wage.”

  The Independent Ireland Leader also pushed back at suggestions from some within government that the VAT cut represents a major cost to the exchequer. “They’ve made quite the performance of the supposed €700m ‘cost’ of this measure,” he said. “But what is the cost of doing nothing?”

  “If even a fraction of the businesses under threat are forced to shut, the knock-on effects will be devastating – not just in job losses, but in the broader hollowing out of communities where these businesses are anchor employers.”

  With geopolitical uncertainty posing a threat to foreign direct investment and multinational employment, Collins said now is the time for government to double down on supporting domestic industries.

  “Hospitality and personal services remain among the biggest indigenous employers in the country. These are not faceless corporations. They’re family businesses, corner cafés, village pubs – the live wires of towns and parishes up and down the country.”

  Noting the ongoing impact of the Covid-19 pandemic, he said that habits have shifted and challenges remain. “Many consumers still aren’t dining or socialising the way they used to. We’re not back to normal – and pretending we are only adds pressure.”

  While welcoming the indication that the 9 per cent rate will now be permanent, Deputy Collins said the timeline was unacceptable.

  “If the Government is serious about saving jobs, then July 1st 2026 is simply too far away. We need movement in January at the latest. And in truth, struggling businesses need clarity and support before the end of this year.”

  Independent Ireland will continue to campaign for earlier implementation and a broader commitment to rural economic resilience in Budget 2026. 

  Deputy Collins concluded his remarks by noting that thankfully, another common sense policy proposed in the pre-election manifesto by his Party is finally coming to fruition under this Government: “At this rate, Independent Ireland will be the first opposition party in history to have its entire pre-election manifesto implemented.”