Minister for Enterprise Peter Burke has dismissed concerns that the hospitality industry won’t pass on a fresh VAT cut for the sector to consumers, instead focusing on the need to keep the industry viable.
Speaking to reporters on Wednesday following the budget, Mr Burke said he wants the VAT cut to “inject viability” into the hospitality sector and encourage job growth, rather than trickling down to workers or consumers through higher wages or lower prices.
“We’re trying to put viability into businesses, but it’s up to businesses what price they charge, what profit level they have in their business, and what allows them to grow,” Mr Burke told reporters on Wednesday following the budget. “What I want to see is that we grow jobs in the sector, obviously.”
Accommodation and food service workers had total average hourly earnings of €19.47 last year, according to the Central Statistics Office, the lowest of any sector.
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The Fine Gael TD said European Union rules prevented the Government from excluding big fast food chains like McDonald’s from the decision to slash VAT from 13.5 per cent to 9 per cent from July next year.
Hospitality businesses, in particular, have faced the “most significant” increases in their regulatory burden in recent years, Mr Burke said.
He added that the cost of regulatory changes like pension auto-enrolment and the increase in the national minimum wage announced in the budget “is borne by those businesses”, and that the VAT cut will “allow them to grow”.
“It will keep them viable,” he said.
Mr Burke denied that he was at odds with Taoiseach Micheál Martin, who recently told the Irish Examiner that he would like to see the VAT cut translate into lower prices for consumers.
“Let’s be quite clear what I said,” Mr Burke said. “It’s difficult to have viability and affordability together, but businesses have to provide value for their customers.”
He said hospitality and food service businesses are under significant pressure, as evidenced by the increase in company liquidations in the sector over the past year.
“That’s why we needed to take action to inject viability,” Mr Burke said. “The businesses you are referring to are not making money. I want to be very clear on that. Many are on the brink.”
Multinational fast food giants like McDonald’s, which reported a 17 per cent surge in pretax profits from franchise fees to €42.43 million at its Irish arm last year, could not be excluded from the cut because of the EU VAT directive, he added.
Mr Burke said the framework is “very clear that you can’t discriminate [based on company size] under a tax code”.
He said: “There’s never a case whereby you could differentiate based on turnover or size of premises.”
Mr Burke said he hoped the decision to cut the rate to 9 per cent would draw a line under the long-running issue. “What I’ve said to the sector is this argument is finished. We now go and look at how we develop the sector.”
However, the decision to introduce the cut in July 2026 rather than at the start of the year has faced strong criticism from the sector since it was announced on Tuesday.
The cut, which will cost the exchequer €232 million in 2026 and €681 million in a full year, has also been questioned by economists.
The Irish Fiscal Advisory Council (Ifac), the State’s independent budget watchdog, has calculated the policy would cost the equivalent of increasing the standard rate income tax bands by €2,328, hiring 8,846 nurses or 6,053 teachers.
