Eoghan Dalton

A NUMBER OF restaurants have said they will cut the prices on their menus as a thank you to customers after the government slashed their VAT – but the industry does not expect many to follow suit. 

Instead, most businesses are likely to keep the saving for themselves rather than passing it on to customers, the industry body has said. 

Cafés, restaurants, and fast-food chains saw the VAT rate cut from 13.5% to 9% this week, after it was announced in Budget 2026. 

The move has been controversial with trade unions criticising the cut, while Department of Finance civil servants warned last year that it would reduce the tax base.

While the Restaurants Association of Ireland says this won’t mean cheaper menus, a number of Dublin restaurants including Dax on Pembroke Street, Cluck Chicken in Walkinstown, and Lolly and Cooks have all said that they will reduce their prices in response to receiving the VAT cut. 

Menus are Dax are set at a fixed price, explained owner Olivier Meisonnave, so the dinner menu that previously cost €98 will now cost €94, while a lunch menu that would have cost €68 last month will now be €65.

“Prices have gone up for the last four years and because of the cost of living, cost of food, cost of energy, it’s been a hard time for everyone,” Meisonnave told The Journal.

“The decision is simple: I did it for my customers. I’m going to lose a little bit but we are 21 years open and we have huge amount of regulars – I think 80% of our customers are regular customers, so this is just to give something back.”

The drop might not be massive but are an example of how “margins are tight” in the industry, Meisonnave said.

He added that some of those customers had stayed loyal throughout not just the Covid-19 pandemic, but even going back to the financial crash of 2008 when Dax was much less established.

“I didn’t do it to be pretentious,” Meisonnave said. “It’s for those guys who are with me and helped me during those years.”

He added that it’s “up to every business” on how they want to handle the VAT reduction and whether they’d like to pass it on to customers by reducing their prices.

Elsewhere, the managing director of the Lolly & Cooks cafe group said that it was a way of paying tribute to customers who had supported the business “through some difficult years”.

“It’s not a huge amount but if we can make someone’s morning coffee a little more affordable, we’re delighted to do that,” Churpy Strahan told The Journal.

Industry take

However, Adrian Cummins, chief executive of the Restaurants Association of Ireland, told The Journal that it’s unlikely many will follow suit.

He said there is “no prerequisite for a reduction in price” for any business that gets the VAT cut. 

“Each business will decide for themselves what to do, and from what I’ve seen those businesses make their decision to cut the VAT are using it in terms of a marketing opportunity for customers, so it’s each to their own,” he said.

Instead, Cummins said that any restaurant reducing their prices may be in a better position to do so than others “based on their own business case and policy”.

“The margins in the industry at the moment are not conducive to a profitable business,” he said.

“The government said to us at the launch on Wednesday that there is no prerequisite for a reduction in price,” Cummins said, citing finance minister Simon Harris and enterprise minister Peter Burke.

The cut to the VAT rate, won by the RAI after years of lobbying efforts, is now a “done deal” for the rest of this government according to Cummins.  It is expected to cost €681 million each year. 

“It’s settled, it’s over, obviously just in the lifetime of this government, but the next government might have a different view on it. For the next year’s Budget it’s a done deal,” Cummins said.

A study by the Irish Fiscal Advisory Council examining the impact of previous VAT cuts found the rate of these cuts getting passed on to customers veered significantly.

In 2011, a VAT reduction following the financial crash saw 50% of consumer price cuts passed on to customers, but the most recent cut in 2020 saw a lower level of ‘pass-through’, as it is called. 

According to IFAC, this was likely due to the Covid-19 pandemic, wider economic uncertainty and high inflation at the time.