I along with my colleagues in the Independent Regional Group of TDs have issued a strong call for the Government to reverse its decision to increase the VAT rate for food businesses in the hospitality industry. The Regional Group TDs are calling for a reduction in the VAT rate from the current 13.5% to 9% in an effort to save restaurants, cafes, and pub. They are the heart and soul of local communities across Ireland.

The Government’s decision last September to increase the VAT rate from 9% to 13.5% has had a devastating impact on the hospitality sector, particularly small and medium-sized enterprises. Since the VAT hike 612 food-led businesses have been forced to close their doors. The Regional Group TDs warn that more closures are imminent if immediate action is not taken.

SMEs represent a critical pillar of the Irish economy, accounting for 99.8% of active enterprises and employing more than 1.2 million people. These businesses, often family-owned or led by rural and regional owner-managers, are the backbone of local economies. However, they are struggling under the weight of rising costs and government-imposed charges.

The Regional Group note that Government policies have significantly increased the cost of doing business for SMEs, particularly in the hospitality sector. From energy price hikes to rising insurance premiums, labour costs, and the 50% VAT increase, food businesses are being pushed to the brink. The average restaurant now faces €100,000 in additional costs compared to 2023. This situation is unsustainable.

Ireland’s current VAT rate on food hospitality is the 8th highest in the EU, putting further strain on local restaurants and cafes already struggling with inflation, energy costs, and other input factors.

The Regional Group is calling for a targeted reduction in VAT to 9% for the food sector, a measure they believe is both necessary and affordable. While restoring the lower VAT rate for the entire hospitality sector would cost €750 million annually, applying the reduction solely to food businesses would cost approximately €500 million.

This is about more than just numbers; these are businesses that play a vital role in our communities. Every pub, cafe, and restaurant that closes represents lost jobs, reduced economic activity, and a blow to local culture. The Government cannot say it has not been warned: the upcoming Budget 2025 will be judged by the hospitality sector based on its decision regarding VAT on food.

The Regional Group TDs urge the Government to address these concerns now to prevent further damage to the hospitality sector. They are calling for swift action to reduce VAT for food businesses before more closures occur, not only in hospitality but also across the retail, travel, tourism, and entertainment sectors.

Small businesses are the lifeblood of our local economies and communities. The Government must act now to protect these enterprises from rising costs and help them continue to serve as the heart of our towns and villages.