Restaurants Association chief says Vat cut is not taxpayers 'subsidising' the food service sector

Irish Examiner

7 hours ago

The chief executive of the Restaurants Association of Ireland has said he does not see a Vat reduction as taxpayers subsidising the industry, but rather as a correction to help businesses be more sustainable.
This comes as the RAI publishes a new report, written by economist Anthony Foley, which seeks to make the case for the reduction in the Vat rate for the food service sector from 13.5% to 9% from January.
The reduction in the Vat rate to 9% for the food services sector is expected to cost €674.6m. According to the summer economic statement last month, the Government plans on introducing an overall budget package of €9.4bn, which includes a tax package of €1.5bn and additional public spending of €7.9bn.
The reduction in the Vat rate is expected to make up 45% of the overall tax package.
Given the size of the tax package, and the proportion of it which is made up of this Vat reduction, the Government has much less space to cut taxes for taxpayers like it has done in previous budgets.
On the Vat rate making up so much of the budget tax package, RAI chief executive Adrian Cummins said: "I don't see it subsidising the industry,' but rather a 'correction' to bring it down to a level comparable with the rest of Europe.
He added the reduction would help restaurants be more sustainable and more competitive when it comes to tourism spending.
Mr Cummins said he was 'quietly confident' the Government would implement the reduction, saying it was in the programme for government.
According to the report, small firms, employing between one and nine people, account for 76.6% of the food service sector. However, the proposed Vat reduction would apply to all food service businesses across the country, including some of the larger fast food chains that operate in Ireland.
The RAI report cited data from Bord Bia, which showed of all food services companies, 37.4% were categorised as 'quick service, fast casual, and food to go' while 11.7% were categorised as full-service restaurants.
Mr Foley said the Government could, if it wanted to, target the Vat reduction at smaller companies, but it would be 'difficult to manage and implement'.
"The Government could do it if they developed the systems to do it. So you could say, firms with more than a certain turnover pays a higher Vat than others,' he said.
When asked why the RAI was not advocating for a more targeted approach to help smaller Irish food service business, rather than larger chain fast-food restaurants such as McDonalds, Mr Cummins said 'McDonald's are a member of the association'.
He also added that under EU law it would be illegal to have one Vat rate for fast food operations and another for full-service restaurants.
The RAI said businesses were experiencing a weakening of operating margins with Central Statistics Office data showing food services sales volume and value are declining in 2025.
This coincides with a decline in tourism, and tourist spending, to the country, experienced throughout much of this year.
Mr Foley said the primary objective of this Vat cut was to reduce the cost of doing business, which enables firms to have better margins and reduce the chance of price hikes in the future.
Mr Cummins said there had been 307 restaurant closures to date this year.
The RAI represents 3,000 members out of about 20,000 food service businesses in Ireland.