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The lower Irish VAT rate for the Hospitality sector extended until 2023
Last month, the Irish Minister for Finance, Paschal Donohoe confirmed that The government has extended the lower VAT rate for the hospitality sector for another six months. The lower VAT rate for the sector which is set at 9%, will now stay in place until the 28th of February 2023. This will serve as a great boost to the Irish bar and restaurant trade along with the hotel sector, which are only beginning to see positive increases in trade after a tough couple of years.
The rate was originally reduced from 13.5% in November 2020, as a way of helping businesses in the sector under financial pressure due to pandemic-related restrictions. As part of this year’s Budget, it had been extended until August. This extension could eventually cost the taxpayer an extra €200m. Making the announcement the Finance Minister stated that the decision was partly to help businesses who were in receipt of the Employment Wage Subsidy Scheme, which finished at the end of May.
The majority of businesses still on the scheme were in the hospitality area and collectively employed 114,000 people, he said. Minister Donohoe also touched on the current ‘cost-of-living crisis’ and its impact on the sector. Mr. Donohoe said it was important to ensure the tourism sector can rebound from the pandemic, amid concerns about rising inflation hitting businesses.
“The reality is that a change in VAT across the summer period runs the risk of adding to the challenges that many are now facing in the cost of living, and also runs the risk of adding pressure to employers who are just exiting from a very, very significant support scheme,” he said.
“This is to provide support to the sector, obviously across the busy August
period, but critically as they approach November and December, and we know how important it is that they have a good December trading period,” Mr. Donohoe said.
He also stated that the move “lays the foundations for a really good recovery within a very important part of our economy”, and that he wants employers to “be aware of the importance of sending out the message that Ireland is a good value place to have your holiday in”. Eamon Ryan, the Green Party leader said the VAT rate would not be hiked ahead of the “dark winter” – a “difficult” time for hospitality. “We don’t want to change it then,” he said. “So, I think it will be timed in a way that gives the hospitality sector the best chance to get back on its feet.”
Culture minister Catherine Martin has stated previously that she would be in favor of extending the 9pc rate for the sector. Adrian Cummins of the ‘Restaurants Association of Ireland said the move would
help settle businesses ahead of what will be a “bumpy tourist season”.