Dáil Éireann Debate, Thursday - 19 June 2025
81. Deputy James O'Connor asked the Minister for Enterprise, Tourism and Employment if he will outline any engagements between his own Department and the Department of Finance regarding the potential extension of the hospitality excise rebate scheme to include public houses that do not serve food, given their continued cost pressures and importance to the rural and night-time economy; and if he will make a statement on the matter. [33206/25]
Amharc ar fhreagraI understand that the Deputy is referring to the Hospitality VAT rate, in the context of commitments in the Programme for Government 2025: Securing Ireland’s Future. The former commits to bring forward measures to support SMEs, in particular the retail and hospitality sectors - acknowledging the increased cost pressures on these sectors - and that this will entail changes to VAT, among other measures (and to be implemented as part of the normal Budgetary process).
It is important to note that VAT policy is subject to the VAT Directive agreed at the EU-level. EU rules allow Member States to apply a headline VAT rate, and two additional reduced rates on goods and services (with limits as to how low these rates can be). There are also a small number of further exceptions, where a 'super' reduced rate below 5% (or a zero rate) may apply. In the case of Ireland, the following rates apply:
• standard rate (23%)
• first reduced rate (13.5%)
• second reduced rate (9%)
• livestock rate (4.8%)
At present, the hospitality sector is subject to the first reduced rate at 13.5%. The hospitality sector was subject to the 9% rate from July 2011 to January 2019 and again from 1 November 2020 to 31 August 2023. This was facilitated by changing the applicable rate of VAT, which is allowable in certain instances and subject to the rules of the VAT Directive.
I appreciate the specific difficulties faced by publicans operating a public house which does not serve food and I understand that these businesses would not have benefitted from previous VAT reductions (when compared to those which did serve food). My Department has brought forward a number of measures in recent years which will have been of benefit to smaller pubs in particular, such as the Increase Cost of Business (ICOB) and the Power-Up grant schemes.
With regard to the VAT rate applied to alcohol, I understand that it is not possible under the EU VAT Directive to apply a reduced VAT rate to alcoholic beverages. Therefore, any change to the applicable VAT rate for alcohol would require a change in the standard rate of VAT and consequently, a change to all goods and services for which it is applicable.
My officials and I regularly engage with the the Department of Finance on tax policy, including as part of the annual Budgetary process. I welcome the commitment in the Programme for Government to bring forward changes to VAT, PRSI and other measures. I believe that it is important that public houses that do not serve food must be considered in the context of these commitments. Ultimately, any changes to VAT policy are a decision for the Minister for Finance as part of the annual Budgetary process.
