TRANSPORT AND TOURISM minister Leo Varadkar has confirmed that the lower 9 per cent VAT rate, introduced four months ago to try and stimulate tourism, will be left unchanged in the forthcoming Budget.

The reduced rate – which applies to tourist-friendly industries such as hospitality – was introduced in controversial circumstances earlier this year, and is being paid for the levy on private pensions.

Although the highest rate of VAT is to be raised from 21 per cent to 23 – after details of the proposal were included in documents circulated to German MPs last week – Varadkar said the lower rate would not be similarly raised.

Speaking in Dublin after this morning’s Cabinet meeting, Varadkar assured attendees at a Good Food Ireland event that the lower 9 per cent rate would continue to apply throughout 2012.

“This rate is significant because it principally benefits home-grown employers which are based in Ireland,” he said. ”The vast majority of hotels, restaurants and leisure businesses are Irish-owned and any profits stay in Ireland.

“Many operators moved quickly to pass the VAT cut on to their customers following its introduction. Even where the rate was not passed on, it still benefited the tourism industry by helping businesses to expand their operations or take on additional staff.”

This morning’s meeting was expected to make decisions on the €1.45bn of spending cuts required in the Budget, which will be delivered in two weeks’ time.

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Over 90 per cent of restaurants in survey pass on VAT cut