Hotels to miss out on Fine Gael promise of VAT cut

Fine Gael has pledged to cut the VAT rate for the food-related hospitality sector to 11%, according to a new party election promise – just weeks after no change was implemented in the Budget.

Taoiseach Simon Harris set out his party’s plan for businesses at the start of a busy day of campaigning on Saturday, on the morning after formally announcing the election.

The VAT pledge comes just more than a month after the coalition Government chose not to – despite extensive lobbying from the sector.

The rate had previously been cut to 9% to support the hospitality sector during the pandemic before being restored to 13.5%.

The industry had been calling for a 9% rate in the Budget announced on October 1, with an 11% middle ground also floated.

However, no such cut was announced and the rate remained at 13.5% – much to the disappointment of hospitality representatives.

Fine Gael is now planning to permanently reduce VAT on food-based hospitality, entertainment and hairdressing.

Adrian Cummins, of the Restaurants Association of Ireland, welcomed the move, saying Fine Gael had listened to the concerns of food-led businesses.

He said: “It’s early days of the campaign but from a hospitality perspective what we are hearing is extremely positive and recognises our lobbying activity regarding a VAT reduction being key for stability in our industry.”

Mr Bacik warned that her reading of the Fine Gael policy would also increase VAT for some businesses up from 9% to 11%.

She added that any plan for businesses must also go “hand-in-hand” with supports for workers, as she reiterated a call for a living wage.

Sinn Fein described the proposal as “laughable” and “half-baked”, adding that it was “too little, too late”.

The party’s finance spokesman said it was committed to reintroducing 9% VAT for the hospitality sector, excluding hotel beds.

Labour leader Ivana Bacik said the proposal rang “hollow”, adding the Government had the opportunity to “make a difference for struggling business” in the the last Budget.

She said: “It is going to ring hollow for many small businesses to see Fine Gael now prospectively offering a cut in the VAT rate.”

Asked on Saturday why the measure was not included in the Budget, Mr Harris said it had not been possible to deliver everything Fine Gael wanted to in the final package agreed by the three-party coalition.

Pressed on the exclusion of hotels, Mr Harris defended the decision and said it was targeted around the cost of food rather than hotel rooms.

Fianna Fail leader Micheal Martin said an 11% rate would mean gas and electricity prices would have to rise.

Speaking in Cork, he said: “So it would increase energy costs for businesses and households – that’s something I think that we have to reflect on.

He said Fianna Fail is committed to keeping VAT at 9% for energy prices.

However, Mr Martin said he was not ruling anything out as it will provide a 300 million euro support fund for businesses and a 1.5% reduction in the PRSI for employers who have staff on the minimum wage.

He added that he supported a broader review of VAT more generally.

Asked if the Greens would support the 11% VAT rate, party leader Roderic O’Gorman said: “We’ll be making our proposals clear at our manifesto launch next week but we are looking to make sure – particularly for that hospitality sector – that we can bring in meaningful supports for them.”

Fine Gael is also promising a PRSI rebate for small local businesses and 4,000 euro grants towards energy bills for the hospitality sector.

Mr Harris said the measures to cut costs for businesses would be delivered within the first 100 days of government.

“That is why Fine Gael will permanently cut the VAT rate to 11% for food-based and entertainment businesses, as well as hairdressers, to give these businesses certainty.”

Mr Harris said the three-year PRSI rebate could be worth more than 33,000 euro for a business with more than 50 staff.

He added: “If re-elected, Fine Gael will back our businesses with an investment of over 800 million euro and will introduce this package within 100 days of government.”

Minister for Justice Helen McEntee said her party would implement a retail crime strategy.

The Fine Gael deputy leader also wants to introduce an “additional penalty” for assaults on retail workers.

Fine Gael’s coalition partners Fianna Fail and the Greens hit the campaign trail on Friday, ahead of polling day on November 29.

Opposition parties Sinn Fein, Labour and the Social Democrats were among those appealing to the public to vote for a change of government.