Hotel sector calls on government to reinstate reduced VAT rate

Representatives of the hotel industry are appealing to the government to restore the 9 percent VAT on catering services.

Sector representatives are calling for a return to the reduced rate introduced during the COVID-19 pandemic, saying the industry is struggling with the current rate of 13.5%.

The Irish Tourism Industry Confederation, the Irish Restaurant Association, the Irish Winemakers Federation, the Irish Hotels Federation and the Association of Licensed Winemakers will meet MPs and Senators on Wednesday ahead of Budget 2025.

In a joint statement issued ahead of the meeting, the groups said the companies were at a crossroads, “struggling with very low margins and reduced profitability due to steadily rising operating costs.”

“This is largely due to the government’s economic policies, including a series of labour cost increases that came into effect in rapid succession. The impact of these measures has been particularly acute for hospitality businesses, given the labour-intensive nature of our industry.”

The groups added that companies are predicting “worrying” cost increases in the coming year.

“Meanwhile, these businesses are struggling with the impact of the September VAT increase, combined with the impact of significant pressures on consumer finances – all of which continues to erode profitability and undermine competitiveness.”

The statement added: “The government has repeatedly assured us that it understands the scale of the challenges facing the hospitality industry, but unfortunately this has not yet translated into meaningful support.

“It is now vital that the Government does everything possible to help our sector, and indeed the wider tourism industry, get back on a more stable footing.

“At a minimum, this must include the reinstatement of the 9% VAT rate on food-related hotel services.”