The Government is said to be exploring ways of excluding multinational fast-food chains from a reduced rate of VAT aimed at shoring up the hard-hit hospitality sector.
The Government has signalled that it will reduce VAT on restaurants and food-serving businesses in the budget from 13.5 per cent to 9 per cent to help them fight costs.
The Department of Finance’s Tax Strategy Group has costed the move at €675 million, a sum that would account for almost half the Government’s proposed €1.5 billion tax package.
“The cost depends on what form the package takes ... what it includes and what it doesn’t,” said Minister for Enterprise Peter Burke.
RM Block
[ Government advised to reconsider hospitality VAT cutOpens in new window ]
“There will be a lot of negotiation around that shape so it may not necessarily reflect the full cost in the tax strategy papers,” he said.
It is understood the Government is examining ways of excluding big food franchises such as McDonald’s from the measure.
[ Budget 2026 plans are coming at wrong time in economic cycle, ESRI warnsOpens in new window ]
However, there is a worry that franchised businesses could change their structures in response to Government moves to exclude them.
Speaking before a Fine Gael-hosted conference on small business in Carlow on Saturday, Mr Burke said there were about 240,000 people employed in the State’s hospitality sector.
The NFL comes to Dublin: How it became the richest sports league in the world
“Many of them are based in regional areas where that employment is at a premium,” he said.
“It’s a sector that thrives on its authenticity and we don’t want to gravitate towards a place where we have exclusively chains,” he said.
He acknowledged that the small and medium enterprise (SME) sector had come under significant cost pressure due to “so many regulatory interventions” while insisting the VAT cut would enhance the capacity while increasing footfall.
A reduced VAT rate for hospitality combined with an increased R&D (research and development) tax credit are expected to form the main enterprise elements of next month’s budget.
In a bid to enhance the State’s attractiveness as a location in an increasingly competitive battle for foreign direct investment, the Government looks set to increase the R&D credit from the current 30 per cent rate while laying out a plan for future increases.
The credit allows companies claim €30 back for every €100 spent on R&D, in addition to corporate tax deductions.
Mr Burke said shoring up inward investment would be a key focus of the budget.
“You’re going to see a very big statement on research, development and innovation,” he said.
“We need to go big on early-stage manufacturing and have a very strong competitive offering” given the volatile geopolitical climate.
“The problem for Ireland is that the longer that manufacturing goes on we come under pressure because a lot of those companies have lower-cost jurisdictions that we lose out to,” he said.
BD medical technology and Cardinal Health have recently closed plants here following global supply chain reviews.
Changes to the R&D tax credit will be “the hallmark of the enterprise budget” with the Government setting out a “pathway” for future changes, he said.
Mr Burke acknowledged that US tariffs had created “uncertainty” for businesses and that his department, in conjunction with the Department of Foreign Affairs, had developed an action plan which includes grants for exporting firms to explore new market opportunities outside of the United States.
On the high cost of energy here, an issue frequently highlighted by businesses, Minister Burke said an additional €34 billion in capital spending on energy had been earmarked between now and 2030.
He also said a national energy taskforce had been set up “to look at how we make our energy prices more competitive”.
