24-07-2025
- Business
- Irish Daily Mirror
Reduction of 9% VAT rate for restaurants would cost the State €674 million
Reducing the VAT rate for restaurants in Budget 2026 would cost the State €674.6 million annually, the latest Tax Strategy Group papers show.
This comes as ministers are considering holding off on a cut to 9 per cent VAT for the sector until the middle of next year, especially with looming US tariffs. Published by the Department of Finance every year, these papers drawn up by civil servants outline options that should be considered for the Budget.
The hospitality sector has been lobbying for a reduction in VAT to 9 per cent ever since it was reinstated to 13.5 per cent after a relief during the pandemic. The Covid-19 tax relief applied to all businesses within the sector, however, in Budget 2026 the government is considering a reduction just for food and catering.
However, the papers noted that other sectors - such as hairdressing - are facing similar challenges to the hospitality industry, in particular with regard to labour costs. The current 9 per cent VAT rate for gas and electricity is also set to end in October, as a further one year extension would cost the State €198m.
In its Social Protection Budget Package, the Tax Strategy Group recommended a second tier child benefit to "deal with deprivation". It suggests a means tested payment on top of the Child Benefit to families on social welfare or working family payments.
However, the report noted that this is "a complex issue that would need to be fully understood before any new second tier payment is introduced". The papers also show that a tax relief for gym and sports club membership is unlikely in Budget 2026. Public Expenditure Minister, Jack Chambers. (Image: PA Wire/PA Images)
It was suggested by Public Expenditure Minister Jack Chambers, but the Tax Strategy Group said it would be a "deadweight" measure. The report said a relief on gym memberships "would not necessarily have direct correlation to improved public health and activity levels".
It would cost the State €65m if the objective was to add 100,000 new members to the already existing 550,000 gym users.
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