New Report Highlights Economic Case for the 9% VAT Rate for Restaurants

The Restaurants Association of Ireland launches significant new economic report calling for restoration of 9% VAT for food services

The Restaurants Association of Ireland, supported by economic research from Economist Tony Foley, today launches a significant report making the case for the restoration of the 9% VAT rate for food services and addressing recent criticisms of this policy measure.

The Restaurants Association of Ireland rejects some recent commentary and claims questioning the desirability of restoring the 9% rate. The restaurant sector has faced significant cost increases from market-priced inputs and Government induced costs, with independent assessments confirming these pressures.

Small firms dominate the sector, with 76.6% of hospitality enterprises employing between 1–9 people. These firms are particularly vulnerable to market and policy shocks. Just 0.4% or 73 out of 20,213 hospitality enterprises are considered large businesses or food chains.

Recent data has shown declining food services sales volume in 2025, weak lending to restaurants, and underperforming tourism related restaurant activity. The sector is not booming, and margins are under extreme pressure.

A reduced VAT rate for hospitality is widely used internationally, with Germany most recently announcing they will be reducing their VAT Rate to 7% in January 2026.

The report emphasises that food services are a cost-of-living issue for the wider population and that the restoration of the 9% rate is justifiable in both a macroeconomic context and a strategic economic development context. Even with a 9% VAT, the hospitality sector would continue to contribute significantly to the Exchequer.

The Restaurants Association of Ireland position on Vat 9 is as follows:

1.  Significant weakening of operating margins.

2. CSO Monthly Services Index shows food services sales volume and value are declining in 2025.

3. Headline hospitality employment growth of 6.7% in Q1 2025 overstates actual employment growth when adjusted for part-timers; Dublin performance differs from the rest of the country.

4. International tourism is down by 13.5% in the first six months of 2025 compared with 2024, with tourism spend also down by 16.9%.

5. Central Bank credit stats indicate struggling businesses: gross new lending €17m (Q1 2024) to €6m (March 2025).

6. Failte Ireland Tourism Barometer (June 2025) reports weak restaurant performance, with 69% of businesses reporting a decline in revenue compared with 2024.

7. Revenue contribution (2024):

– Hospitality tax receipts: €2.180bn (excluding excise)

– Total sector contribution (including alcohol excise): €2.736bn

– Even with VAT 9, the sector continues to contribute substantially to the Exchequer

The reinstatement of the 9% VAT rate is necessary, sensible, and justified. The primary objective is to restore a viable commercial model for the sector, support SMEs, and enable long-term development, including the potential for food tourism and a robust, profitable restaurant sector.

Speaking on the launch of the report Adrian Cummins, CEO of the Restaurants Association of Ireland said:

“The 9% VAT rate is critical for thousands of restaurants and cafés across Ireland. Businesses have built their financial planning around its promised return, and any delay or uncertainty risks undermining that planning.

“The financial model for food businesses is broken and without the reinstatement of the 9% VAT rate many just simply will not survive.”

“With 99.6% of food businesses in Ireland classified as SMEs, the Government must honour its commitment to the 9% VAT rate and safeguard more than 20,000 enterprises and the 220,000 people they employ. Only 73 of these businesses or just 0.4% are considered large companies. Supporting SMEs is critical for the sustainability of our sector and the wider economy.”

Anthony Foley, Emeritus Associate Professor of Economics at DCU and economic researcher on the report, stated:

“The sector plays a significant role in both regional and national employment and economic activity. However, its business model has been severely undermined by rising labour and input costs, much of which stem from government policies.”

“Without a supportive measure like Vat 9 the sector is like to face a substantial decline based on market forces and non-viability at current prices. In addition, Vat 9 supports ordinary consumers as well as thousands of small enterprises”

Read The Economic Case for the 9% VAT Rate for Food Services Here