Reduced 9% VAT rate to expire at midnight

September 1, 2023

The reduced 9% VAT rate for tourism, hospitality and some other services will expire at midnight and return to 13.5%.

The planned increase is set to go-ahead despite last minute pleas by business organisations for its retention.

The Government extended the lower rate for the final time in February.

It made the decision after an economic assessment by Government officials found there was no economic case for any further extension.

Government ministers have since consistently ruled out any further extension to the lower rate, because it is considered to be both regressive and costly.

The extension until today is estimated to have cost the Exchequer €300m in tax revenue foregone.

However, last week Ibec called for it to be maintained, warning the rise, coupled with a variety of other upcoming cost increases for businesses, would heap additional financial pressure on firms.

Ibec claimed it has played a vital role in sustaining enterprises and preserving a significant number of the more than 300,000 jobs in the experience economy, which is worth €4bn annually.

While organisations representing hairdressers and restaurant owners have also previously warned that that an increase in the rate will put some out of businesses.

Also opposed to the rate change, the Irish Tourism Industry Confederation warned earlier in the summer that it would add to inflation and erode competitiveness.

However, the Department of Finance previously said the rate was only extended to August in recognition of the employment in the sector and to give businesses time to transition to the changing economic and policy environment, as well as to avoid upward pressure on prices while inflation was high.

In its report published last year, the Commission on Taxation and Welfare recommended that the rate be restored to the 13.5% level and that it should be increased progressively over time.

The 13.5% rate was lowered to 9% in November 2020 to help stimulate activity in the tourism and hospitality sectors during the pandemic and was extended in May of last year, as well as in February this year.

Article Source: Reduced 9% VAT rate to expire at midnight – Will Goodbody – RTE

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