The Minister for Public Expenditure and Reform has said the higher VAT rate for hospitality will remain, despite claims by the Restaurants Association of Ireland that hundreds of businesses are closing as a result.
Paschal Donohoe said the lower 9% VAT rate, reintroduced during the Covid-19 pandemic, was only ever meant to be temporary.
“I always regret any small business within our country closing, but it was made very clear at the time in which we moved down to the lower VAT rate that it was a technical measure to help deal with the effects of the hospitality sector being closed,” Minister Donohoe said.
He was speaking after the Restaurants Association of Ireland (RAI) released new figures showing that the number of restaurants, cafés and other food-led businesses forced to close since the VAT rate increase last September has reached a total of 577.
In July alone, 45 outlets alone closed their doors, the RAI said.
It added that in a recent survey, 74% of respondents said they believe they will have to close their businesses if the VAT rate on food is not reinstated to 9% in October’s Budget.
“While the pace of closures has slowed slightly during the summer compared to the tsunami we witnessed at the beginning of the year, this was expected,” said RAI chief executive, Adrian Cummins.
“Many food-led businesses are holding on by a thread, hoping the busy season will provide some relief and that the Government will act in October’s Budget to restore the 9% VAT rate.”
“But the reality is that these businesses are still in crisis and, without a return to the lower VAT rate, we are guaranteed to see another wave of closures as we leave the summer behind and move into the hospitality sector’s quieter months.”
Paschal Donohoe said while there will be a cost-of-living package in Budget 2025, the nature of the measures and when they will be made available still has to be agreed.
“We will do that in September. We will do that as part of the normal budget process,” he said.
“I think it is fair to say that while there will be a package, we also recognise that prices are still high for households and businesses, but we have also seen the rate of inflation within our economy fall from around 10% to 2%, and that is something that we will consider when we are putting together the budget package,” he added.
Speaking on RTÉ’s News at One, he said the expenditure report published today outlines the success of many measures in dealing with soaring prices.
He said while life is very expensive, the measures introduced from a tax and social welfare point of view alongside the energy credits have helped.
Minister Donohoe said he was listening to the Fiscal Advisory Council, adding that he had always adopted a careful approach to public finances.
He said if he had implemented the 5% spending rule over the last few years, he would not have been able to tackle the pandemic and its economic and health costs, as well as soaring prices.
“I laid out for next year that we will have spending growth of around 6.9% compared to where we are this year meaning that our overall budget spending for next year will see an increase of 6.9 billion,” he said.
He said the Government will be spending more on capital expenditure and will have to fund the health service and the public service pay agreement in line with inflation for this year.
He said IFAC’s key critique is they need to run budget surpluses, which he said the Government have done over the last number of years.
He said the fifth budget will get the balance right “between being careful with our public finances but also helping with the issues within our society that I know are still there”.
The Minister also said he believed the rate of payment of the TV licence would continue to recover.
Mr Donohoe was asked what would happen to multi-annual funding plans for RTÉ should the rate of payment of the TV licence fall again.
“I am very confident that the levels of compliance with the television license are going to improve,” the Minister said.
He added that the latest figures published by the collector in relation to compliance levels had given weight to that view.
“As we continue to restore trust in RTÉ, which I’m confident will happen, and as we allocate more funding to An Post to deal with compliance and collection of television license that it will not only recover to where it was in the past, but it will go to a higher level,” he said.
The Minister said he believed ‘very strongly’ in the need to keep the TV licence system in place.
“Minister Martin was equally emphatic in saying that if we’re going to keep the television licence, it’s important that we have certainty then regarding what overall funding will be over three year period, which I agreed to,” he told the programme.
Article Source – Higher VAT rate for hospitality to remain – Minister – RTE
