Pearse Doherty (Donegal, Sinn Fein)
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3. To ask the Minister for Finance if he will deliver on election campaign promises to reduce the VAT rate for the hospitality sector in advance of the budget in October 2026, in recognition of the difficulties faced by many small businesses in the hospitality sector; and if he will make a statement on the matter. [5418/25]

Pearse Doherty (Donegal, Sinn Fein)
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This is about the reduction of the VAT rate for the hospitality sector. The Minister will be well aware that Sinn Féin was the only party to call for the 9% VAT rate for the hospitality sector in the general election. The Minister campaigned for a rate of 11%, and Fianna Fáil wished to keep the higher rate. There is a commitment in the programme for Government to reduce the rate. It has been reported that it will be 9% but the programme for Government is vague on the percentage. Can the Minister confirm the Government’s position? Will the rate be 9%? When will it come into effect? Will it be in effect before the summer, on budget day or 1 January?

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy will be aware, in making any decisions on VAT rates or other taxation measures, the Government must balance the costs of the measures in question against their impact and the overall budgetary framework.

The programme for Government is clear. It commits us to introducing measures to support SMEs, in particular in the retail and hospitality sectors. It acknowledges the increased cost pressures on these sectors and states that this will entail changes to VAT, PRSI and other measures. The programme makes it clear that these measures will be implemented as part of the normal budget process. This process will consider the timing of any VAT change as well as its scope.

The Government is very conscious of the pressures faced by businesses in the hospitality sector, and that is why we provided for a 9% VAT rate from 1 November 2020 to 31 August 2023, at a cost of over €1.3 billion. It is also why we introduced other measures, such as the increased cost of business grant and the power up grant. I wish to reaffirm, given that it is included in the programme for Government, that any such changes are matters for the budgetary process and will be dealt with on budget day.

Pearse Doherty (Donegal, Sinn Fein)
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Can the Minister offer clarification to the House and, more importantly,to the thousands of businesses across the State and the 130,000 people dependent on jobs in the hospitality sector? That sector is under pressure. We have seen 700 businesses close down since the Government increased the VAT rate to 13.5%. According to CSO employment figures released in June, the hospitality sector saw the largest drop of any sector, namely 0.9%.

Is there a reason the Minister is not committing to a rate of 9%? Everybody believes that the rate will be 9%. Is he not doing that just because it is tradition to do it on budget day or is there a question mark over whether it could still be the 11% he advocated during the general election campaign? Is it still up for debate? That is the first question.

The Minister made a commitment and recognised that there was a need to do this within the first 100 days of the Government being in office. Does he still believe that? We strongly believe that this should be done before the summer. If it does not happen then, when will it happen? Reference to the budget can mean something happening on budget night or on 1 January. What sectors will be included?

Paschal Donohoe (Dublin Central, Fine Gael)
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I absolutely appreciate the value of the 9% hospitality rate and the help it can offer to the hospitality sector. I understand that 9% is the rate that can have the biggest effect.

The timing of this relates to the fact that it will be a significant move. If a move is made - and my view is that when we decide the scope of that move, it should be concentrated on the food and catering sector - its overall cost in a full year will be €675 million. That is a very big decision to make. Decisions of that scale should be confined to budget day. In recent years we have had to make many significant decisions outside of the normal budgetary process. Doing that is no longer appropriate in the context of where we are now because of all the risks around us.

I understand the value of the 9% rate. My view is that it should be concentrated on those parts of the economy where it can deliver the biggest benefit. Because of the scope and scale, however, it needs to be a decision that is made on budget day.

Pearse Doherty (Donegal, Sinn Fein)
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I am very concerned about what the Minister just said. I say that because I have been in premises and spoken with hoteliers and restaurateurs. They opened up their books to me in some cases. They are expecting a reduction to 9%. They are talking to their accountants and figuring whether they can hang on. They are also talking in some cases to their bank managers. The Government was saying it would be 9%. It is not clear now whether it will be 9%. Is there a reason the Minister is not saying what everybody else said after the programme for Government was agreed? The number is not in the programme for Government. That is why I am asking the Minister the question. Can he give any comfort to people expecting a 9% rate and engaging with their bank managers and accountants on that basis that this will be the rate?

There are others, outside of the accommodation sector, such as the hospitality sector, the events industry, cinemas and so on, who were looking for this. Can the Minister clarify whether this will apply to them or is he of the view that it relates solely to hotels and catering?

I ask the question for the third time: will this take effect on budget night or on 1 January? This is important information for businesses thinking of whether they can hang on.

Paschal Donohoe (Dublin Central, Fine Gael)
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I understand the value of the 9% VAT rate. It is my intention to be able to deliver such a move, but such a move would entail a significant cost, which is why it needs to be part of the overall budget process. As to what that VAT rate will be applicable to, my view is that it can have the biggest impact on food and catering, as I made clear in my earliest answer to the Deputy. The expansion beyond that would entail additional significant cost, and it is because of all this that we need to make those decisions as part of the normal budgetary process. We cannot be spending hundreds of millions of euro and even more outside of the normal budgetary decisions we make because of the risk and the uncertainties around us. I want to confirm what my intention is as regards the VAT rate but indicate that this decision should be taken on budget day. Because it will be taken on budget day, any effects will be felt in the following year, from 1 January.