Thursday, 5 March 2020
Department of Finance
VAT Rate Reductions
Given that the impact of an increase in the VAT rate on the hospitality sector as a whole has only recently been reviewed by the Department of Finance and the Revenue Commissioners, there does not seem to currently be a case for reviewing the impact of the increase.
In addition, the main finding of the Department’s Review is that expenditure on goods and services subject to the 9% is particularly sensitive to income growth and to the economic cycle, more so than to price changes. This is evidenced by studies which have shown that hairdressing services are twice the cost in Ireland compared to Northern Ireland, despite the fact that a 20% VAT rate applies to the service in the North compared to 13.5% here.
However, the Department will continue to monitor all economic activity in the normal way as part of the budgetary cycle.