The Restaurants Association of Ireland (RAI) has said that many food businesses will not survive if the planned VAT cut for restaurants and cafés is delayed.
The group has produced a report making the case for VAT for food businesses to be reduced to nine per cent following recent commentary questioning the decision.
The RAI argues that restaurants have faced significant cost increases from "market-priced inputs and government-induced costs".
Small firms dominate the sector -- more than 76.6 per cent of hospitality enterprises employing between one and nine people -- and such firms are particularly vulnerable to market and policy shocks.
Around 0.4 per cent or 73 out of the 20,213 hospitality enterprises are considered large businesses or food chains.
The RAI claims restaurants have seen significant weakening of operating margins and cited figures from the CSO showing food services sales volume and value have declined in 2025.
Additionally, the group said that headline hospitality employment growth of 6.7 per cent overstates actual employment growth when adjusted for part-timers, and that Dublin's performance differs from the rest of the country.
International tourist numbers were down by 13.5 per cent year-on-year in the first six months of 2025, with tourist spending falling 16.9 per cent in the same period.
The latest Fáilte Ireland tourism barometer for June showed that 69 per cent of businesses had reported a decline in revenue compared with 2024, while Central Bank figures for March show gross new lending in Q1 dipped from €17m to €6m.
The report emphasises that food services are a cost-of-living issue for the wider population and that the restoration of the nine per cent rate is justifiable in both a macroeconomic context and a strategic economic development context.
Even with a nine per cent VAT, the hospitality sector would continue to contribute significantly to the Exchequer. Hospitality tax receipts came to nearly €2.2bn in 2024, or more than €2.7bn when including alcohol excise.
“The nine per cent 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," said Adrian Cummins, chief executive of the RAI.
“The financial model for food businesses is broken and without the reinstatement of the nine per cent VAT rate many just simply will not survive.”
"With 99.6 per cent of food businesses in Ireland classified as SMEs, the Government must honour its commitment to the nine per cent VAT rate and safeguard more than 20,000 enterprises and the 220,000 people they employ."
Anthony Foley, emeritus associate professor of economics at DCU and author of the report, said: "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 stems from government policies.”
“Without a supportive measure like VAT 9, the sector is likely 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."
(Pic: Getty Images)
