Excluding large fast food chains from any cut to VAT on the restaurant industry in Budget 2026 would likely be “unwieldy,” Taoiseach Micheál Martin has said.
The Government was confident it would be able to “segregate” any VAT break in the hospitality sector to apply to restaurants, but not to hotels and accommodation, the Taoiseach said.
A VAT reduction on restaurants from 13.5 per cent to 9 per cent is widely expected to be part of the coming budget, a move that follows an intensive lobbying push from the industry. The change would likely account for a significant portion of the tax measures announced on Tuesday.
In an interview with The Irish Times, Mr Martin indicated that it would be complicated to reduce VAT on restaurants in a way that did not apply to big fast-food chains, as some have suggested.
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“Revenue would always say it’s always very difficult to segregate, although I think we can do it between accommodation and food. But to get into specifics of bigger chains versus smaller chains, I think that would be very unwieldy,” he said.
Mr Martin said fast food giants such as McDonald’s operated on a franchise system, where local operators run individual outlets, which complicated matters. “I’m conscious I don’t want to announce the budget or get into specific tax measures,” he said.
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“Many people, workers in the hospitality industry were saying that they needed the VAT to come down in order to be competitive, in order to sustain employment,” the Fianna Fáil leader said.
“The [tourism] season is shorter in many parts of rural Ireland. We do need high-quality, good-quality, medium-priced hospitality across the country, in rural Ireland, for the tourism industry,” he said.
The Taoiseach signalled measures in the budget aimed at making it more “viable” for developers to build apartments, without detailing the specifics.
However, he said any new budget measures to incentivise building apartments would have to be followed by shovels in the ground on the part of developers.
“All along for the last couple of years, builders are saying ‘we can’t close the viability gap, it’s not worth our while to do the apartments’. Now we’ve taken a number of measures, if we take more in the budget that then will have to be it, and the industry really have to get cracking,” he said.
The Government had earlier this year reduced the minimum required size of apartments, and made it easier for developers to retain planning permission to build. “We have to get more apartments built and more apartments built in the cities,” Mr Martin said.
“That’s what the budget will endeavour to look, and I’m not going to get into specifics, will look at how we can close that viability gap to enable us to get apartments built,” he said.
Other ideas on his mind to help address the housing crisis include examining how space above shops could be converted into accommodation.
“How do we get urban areas going? Living over shops and stuff like that. Existing schemes haven’t really worked, so I think we have to look critically at that,” he said.
The supply of housing needed to go from 34,000-35,000 homes being built a year, to 50,000 a year, he said.
Import taxes on goods sold from the Republic to the United States, introduced by US president Donald Trump as part of his sweeping tariff agenda, had coloured the Government’s thinking when putting the new budget package together.
Changes to give a boost to companies involved in research and development (R&D) would be one way the Government responded to the more turbulent economic world order, he said.
“We now need to just enhance our competitiveness. So the budget is very much about the maintenance of jobs, creation of jobs, and the future of our infrastructure,” Mr Martin said.
Coalition figures have repeatedly said previous cost-of-living measures that were the big features of recent budgets would be scaled back.
On the margins of a European summit in Copenhagen this week, Mr Martin said that would mean a “pivot” from current spending to more State money being put aside for capital projects and infrastructure.
“It will be about the fundamentals around utility, water utilities, the grid, road transport, public transport, and then investment in R&D,” the Fianna Fáil leader said.
“At the moment, we’re behind in infrastructure. We have to invest in it. So we’re pivoting to capital more than current, and that’s where the focus is,” he said.
