The high number of hospitality businesses shutting their doors in recent months has led to renewed calls for a reduction of VAT in the industry to 9% in Budget 2025.

The current VAT rate is 13.5% but was previously lowered to 9% in November 2020 to help businesses struggling with COVID closures.

Since returning to the full rate in September 2023, some 577 hospitality businesses have closed.

Earlier this month, Dublin’s Ukiyo bar and restaurant became the latest landmark in the city to close its doors for good, following earlier closures of Brasserie 66 in Dublin 2 and Token in Smithfield.

Budget 2025

Restaurant Association of Ireland (RAI) CEO Adrian Cummins met with Finance Minister Jack Chambers and Public Expenditure Minister Paschal Donohoe for a pre-budget meeting today to discuss closures in the industry.

Mr Cummins told Newstalk that the RAI made it “very clear” a 9% VAT rate is needed.

“That’s the number one issue in terms of the hospitality sector, in terms of food-led businesses,” he said.

“They took everything on board but no decision has been made yet.

“We have to wait until budget day to see whether we get what we’re seeking but there was a good conversation around the cost of business.

“We made it very clear to the Ministers that the current food-led business model is broken.”

Ukiyo bar and restaurant Dublin. Image: Instagram

He said the VAT reduction would cost the Exchequer €545 million a year.

“However, we think the economic impact will be a lot more to the Exchequer if it's not reduced back to 9%,” he said.

“We feel we're doing a fair share of contribution to the state coffers in terms of taxation already from hospitality.”

Pub closures

A new report issued today also revealed that 2,054 pubs have closed in Ireland since 2006.

It’s led to further calls from Licensed Vintners Association (LVA) Chief Executive Donal O’Keefe for a reduction to 9% VAT in the upcoming budget.

“We stress that the absolute priority is to have a reintroduction of the 9% VAT rate on food,” he said.

“We think the sector needs to become more competitive.

“VAT at 9% is a proven measure to aid business viability, to help businesses become more sustainable.

“We’re seeing restaurants closing at the rate of two per day.”

'It's catastrophic'

Mr O’Keefe said 24% of all pubs have closed since 2006.

“It's catastrophic and it’s pure proof that the sector needs aid to improve its viability.

“We also have the highest excises in Europe; the sector is very heavily taxed and cutting taxes is a direct way to help our sector.”

Budget 2025 will take place on October 1st this year, a week earlier than normal, amid speculation that a General Election is around the corner.

Main image: A 'closed' sign in a restaurant window, 18-11-15. Image: Westend61 GmbH / Alamy