Fine Gael on Saturday pledged to cut the VAT rate for the hospitality sector to 11 per cent, according to a new party election promise – just weeks after no change was implemented in the budget.
Taoiseach Simon Harris set out his party’s plan for businesses at the start of a busy day of campaigning on Saturday, on the morning after formally announcing the general election.
The VAT pledge comes just more than a month after the Coalition Government chose not to – despite extensive lobbying from the sector.
The rate had previously been cut to 9 per cent to support such businesses during the pandemic before being restored to 13.5 per cent.
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Tánaiste Micheál Martin said his party did not “rule anything out” in terms of supporting a VAT change. However, he said what was needed was a broad review of tax rates for all businesses as the Fine Gael proposal could lead to an increase in energy costs.
Speaking on a canvass in Cork on Saturday, the Fianna Fáil leader said the Government had been advised that reducing VAT in hospitality to 11 per cent would lead to an increase in the rate of VAT on energy – which was currently at 9 per cent – to 11 per cent, which would result in increased gas and electricity prices not just for businesses but also for homeowners.
Mr Martin said “there is an argument to say that, if you are going to reduce, go the full hog to 9 per cent because all you are going to do at 11 per cent is raise others up to 11 per cent and you won’t have that 9 per cent base into the future if a particular sector was in trouble”.
Opposition parties questioned the timing of the Fine Gael announcement.
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Sinn Féin’s finance spokesman Pearse Doherty described the proposals as “half-baked” and “laughable”, given Fine Gael had “only last week rejected Sinn Féin’s proposal to reduce VAT for the hospitality sector – excluding hotels – to 9 per cent”.
Labour leader Ivana Bacik said the Fine Gael pledge “rings hollow to me”, while Social Democrats leader Holly Cairns said “election promises coming from some Coalition partners now, pledging belated support to small businesses, are too little and too late”.
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Hospitality should be split between accommodation and food with a 9 per cent VAT rate applying to food and beverages, Ms Cairns has said.
The hospitality industry had been calling for a 9 per cent rate in the budget announced on October 1st, with an 11 per cent middle ground also floated.
However, no such cut was announced and the rate remained at 13.5 per cent – much to the disappointment of hospitality representatives.
Later on Saturday, Fine Gael countered to say that a new 11 per cent VAT rate would have no impact on gas and electricity prices for households and business, as claimed by Fianna Fáil and other parties.
Party sources said in the Budget, it was announced that the lower 9 per cent rate of VAT for household utilities will end in April 2025, at which time it will revert to 13.5 per cent. It said the reversion of the VAT rate for utility bills to 13.5 per cent will happen at the same time the new 11 per cent rate (for hospitality) would be introduced so there would be no net loss for households.
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“There is no change to the plans for the household utility VAT rate [to revert to 13.5 per cent in April 2025] which were announced in the Budget by Minister [for Finance] Jack Chambers ... The Fine Gael manifesto contains a cost-of-living package which will more than offset the impact on households of the household utility VAT rate moving to 13.5 per cent (in April). There is no impact on the vast majority of businesses as they can claim back all of the VAT on utility bills.
“On the other hand the Fine Gael package announced today will result in significant benefits for Irish (hospitality) businesses not only from the 2.5% reduction in the VAT rate but also a PRSI rebate of up €33,150 and an energy grant of €4,000.”
Minister for Justice Helen McEntee also said her party would implement a retail crime strategy.
The general election campaign got under way after President Michael D Higgins dissolved the 33rd Dáil shortly after 2pm on Friday at the request of the Taoiseach. Polling day is November 29th.
After departing Áras an Uachtaráin, Mr Harris canvassed voters in several locations around Dublin, including at Friday night’s Ireland v New Zealand rugby match, as did politicians from several parties, including the Fianna Fáil leader Micheál Martin.
On Saturday, Mr Martin sounded a cautionary note over the possibility of his party going into government with either Labour or the Social Democrats in any future coalition arrangement with Fine Gael after the election.
Mr Martin has already ruled out Fianna Fáil going into any coalition arrangement with Sinn Féin because of their very different economic policies.
“Any party that we go into government with will have to align with policies, for example, that support the enterprise economy, that support the economic model we have which is key to employment, investment and public services thereafter,” the Fianna Fáil leader said.
In a new policy pledge on the environment, Fianna Fáil says it is committed to new onshore and offshore wind farms and solar farms with a combined output above the current capacity in Ireland. It is also promising investment in policies its Green Party colleagues have championed in government – such as bus, rail and light rail.
The Green Party said it “doesn’t know whether to laugh or cry” at Fianna Fáil’s new pledges.
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In a statement, Green Party Minister of State Ossian Smyth said that while it was always positive to see a party taking an interest in climate action, “it was astonishing to hear such newfound enthusiasm from a party which had to be dragged kicking and screaming on so many environmental issues”.
Close of nominations for the election is Saturday November 16th.
Next Tuesday, November 12th, is the last day to register to vote (to register see checktheregister.ie). – Additional reporting PA
