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LAST UPDATE | 7 Oct
OPPOSITION PARTIES HAVE criticised the inclusion of big companies such as McDonalds and Starbucks in the upcoming VAT cut for food-led hospitality businesses.
The VAT for the sector was cut down to 9% on a temporary basis during the Covid-19 pandemic, before being restored to 13.5% in September 2023.
From 1 July, the VAT will once again be reduced to 9% for this sector, as well as hairdressers.
Today, Finance Minister Paschal Donohoe said that this measure will cost €232 million in 2026 and €681 million in a full year.
He further said that this measure “reflects the Government’s commitment to support businesses in the services sector who are facing increased cost pressures.”
Donohoe also said that the move will support “more than 150,000 jobs” in the two sectors across the country.
However, Social Democrats finance spokesperson Cian O’Callaghan said the Budget is “characterised by bad choices and missed opportunities”.
He said one of these “bad choices” is the lowering of the VAT rate to 9% for “multinational companies like McDonald’s and Starbucks”.
“Last year, McDonald’s Ireland made a massive profit of €42 million,” said O’Callaghan.
He said this is not an example of a “company that is struggling” and added that “smaller independent hospitality businesses could have benefitted from more targeted supports”.
“What we got today from this government was a McBudget – a giveaway for property developers and the owners of fast-food chains,” said O’Callaghan.
“It’s a budget that struggling households around the country will find hard to swallow.”
Speaking in the Dáil, Labour’s Ged Nash remarked that this is a Budget for “burger barons and big builders”.
He added that the government prioritised “Ronald McDonald over Joe and Joan Murphy, your man from Supermac’s over the man who gets up early in the morning”.
“The Hamburglar from the 1980s McDonald’s ad is back in town, swiping hundreds of millions in his swag bag from PAYE workers,” said Nash.
Elsewhere, People Before Profit’s Paul Murphy added that it’s a “very disappointing” Budget for many people with the “government giving money to McDonald’s and Burger King”.
Meanwhile, the Irish Nurses and Midwives Organisation said that by cutting the VAT rate for the hospitality sector, the Government “failed to heed advice from the Fiscal Advisory Council who said that the Government could hire 11,400 additional nurses rather than cut VAT for the hospitality sector”.
Speaking to The Journal, Public Expenditure Minister Jack Chambers remarked that the VAT cut is “all about protecting jobs that are vulnerable”.
“A lot of people work in some of the corporations that are referenced, sometimes they are franchises as well which are owned by people domestically and there isn’t a way to distinguish that.”
He added that “tax legislation has to be universal in its application, and it can be very difficult to separate a business in that context”.
In reaction to the Budget announcements, the Licensed Vintners Association (LVA) said the VAT rate cut is a welcome measure but criticised the Government for not taking action to reduce the cost of Special Exemption Orders which enable venues to open beyond standard licensing hours.
LVA CEO Donall O’Keeffe said that the “cost associated with these exemptions is over the top”.
“It is a bit much for the Government to be imposing these charges given the entire late night sector had been patiently expecting the Government’s licensing reforms to take effect for a few years now,” he added.
He also said that publicans in Ireland are currently facing “unreasonable levels of excise duty” which is above the levels charged across the rest of the EU.
“With Irish drinking consumption now at average European levels, this has long since passed being a measure aimed at encouraging moderation. It is the Government imposing a tax on people’s socialising,” O’Keeffe said.
The Vintners’ Federation of Ireland went further and said that the measures taken by Government today “failed to deliver for the thousands of traditional pubs now fighting for survival and leaves food pubs waiting months for promised support.”
The group also welcomed the VAT cut, but said that the Government has ignored traditional pubs by “refusing to introduce the Draught Excise Rebate Scheme”.
Cutting the VAT rate is a measure that’s long been called for by organisations within the sector, including the Restaurants’ Association of Ireland (RAI).
Though the cut to VAT for hospitality was an election promise from government parties and it was included in the Programme for Government, there were signals that this measure potentially wouldn’t go ahead in Budget 2026.
Junior Justice Minister Niall Collins in July went on RTÉ Radio One and said that the VAT cut was “not a done deal”, and that he personally favoured targeted measures to a broad cut.
However, lobbying groups for the sector pushed back on his suggestions and insisted that the Government’s projected cost for the measure of €1 billion for a full year was exaggerated.
-With additional reporting from Diarmuid Pepper
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