Call to widen Vat rate cut to more Cork businesses

A proposal in the programme for government to reduce the Vat rate for hospitality businesses has been welcomed, but there are calls to widen it in order to avoid further business closures in Cork.

Michael Magner, president of the Irish Hotels Federation and owner of the Vienna Woods Hotel, told The Echo: “As an industry, we made it clear across 2024 that the 13.5% Vat rate for food was not correct and needed to be restored to a lower rate.

“We went through Budget 2025 and it wasn’t dealt with.”

He said the programme for government “has a clear commitment to recognise the challenges in food-led hospitality business” given the Vat rate is expected to be revisited as part of Budget 2026, but he added that business costs are spiralling in the meantime.

“That’s very welcome, because it’s still the case that food-led businesses are grappling with unsustainable costs far outstripping inflation — energy costs are not back to what they were; food costs are still high; insurance costs, while there has been movement, are still relatively high too."

Concerning

Mr Magner said that while inflation has been in decline recently: “It’s concerning to hear that there’s been a little spike again due to increases on fuel — if fuel costs go up, that leads to more expensive products and services, so the fact that the Government has identified Vat as one mechanism to address, that is welcome.”

Many businesses will continue to be challenged, and this is likely to have a knock-on effect on patrons, he explained.

“Costs and inputs for businesses are still rising, so unfortunately and regrettably, it’s likely that the consumer will have to pay more again, which is disappointing. Businesses don’t want to have to do that, but it’s just the reality of it.”

Meanwhile, calls have been made for the Vat reduction to be extended to a raft of other small businesses, including small retailers and accommodation providers such as B&Bs.

Struggling

Excel Recruitment managing director Shane McLave said: “There are thousands of other small businesses across the country who would not be eligible for this Vat cut as it stands, but who are really struggling and for whom closure could be a real possibility this year. We are calling on the government in waiting to widen the net”.

He said wage rises, statutory sick pay increases, extension of parental leave and benefits, an increase in PRSI contributions, and the planned rollout of pension auto-enrolment have all put pressure on SMEs recently, adding:

“Employers are not against these reforms; they are as invested as anyone into making them work — but they cannot be expected to play their part without outside support.

“Cork alone has seen a spate of closures in the last 12 months — restaurants, bars, cafes — some of these businesses had been in operation for over 60 years. The Government needs to sit up and take notice — these closures are a stark wake-up call. Businesses are doing everything they can to stay afloat, but they need support.”