A SPOKESPERSON FOR the Minister for Finance has clarified that the cost of reducing the VAT rate for hospitality would be less than the €1bn figure mooted by the minister earlier this week. 

At €1bn, the cost would equate to two-thirds of the total €1.5bn available to the government for tax cuts in this year’s Budget.

On Tuesday, during a press conference on the Summer Economic Statement, Minister for Finance Paschal Donohoe told reporters that the one-year cost for reducing the hospitality VAT rate to 9% for restaurants and hotels would be between €950mn and €1bn. 

However, later in the press conference, he said he would need to clarify if that figure did include hotels. 

A spokesperson for the minister told The Journal today that, based on CSO data, the total one-year cost for restaurants and hotels is actually €810mn. 

This is split €675mn for restaurants and cafes and €135mn for hotels.

The cost for hairdressers would be an additional €40mn.

Meanwhile, the Tax Strategy Papers published this afternoon by the government highlight that it is possible to change the VAT rate for one of these groups without changing the other. 

However, it said the principle of fiscal neutrality requires universal application within the same sector. This means that if accommodation stayed at 13.5% it would have to include all accommodation services, including B&Bs and small hotels.

While the Minister for Enterprise Peter Burke has again stressed today that he is in favour of reducing the VAT rate, Donohoe stressed earlier this week that no decisions have yet been made. 

“The exact component of what the tax package will be and the other tax measures that will be in it, I can’t answer that question until Budget day,” Donohoe said.