Publicans want excise cut after Vat drop for hospitality businesses serving food

Licensed Vintners Association said Vat rate drop from 13.5% to 9% was welcome but said the majority of pubs in Ireland do not serve food and would not benefit

The LVA said pubs and restaurants continued to face significant cost pressures associated with employment, food and drink, energy and insurance.  Picture: Patrick Bolger/Bloomberg

Publicans have called for the reduced Vat rate, which comes into effect on Wednesday, to be followed up with a cut in drink excise rates in the October budget.

The Vat rate charged on food served in pubs and other hospitality outlets returns to 9% from the 13.5% rate that has been in place since September 2023. 

The Licensed Vintners Association (LVA) has welcomed the change, but said pubs and restaurants continued to face significant cost pressures associated with employment, food and drink, energy and insurance. 

The LVA said the minimum wage had increased by 35% since the end of the pandemic, while inflation during the same period rose by 17%. 

"We are relieved and satisfied to finally see the return of VAT9," said Donall O’Keeffe, chief executive of the LVA. "This is a measure we have been pressing for from the moment the Government said they were going to scrap it in the first place. At a time when cost pressures in the hospitality industry continue to rise, this is a very welcome and critical support for those within the hospitality sector who serve food."

However, Mr O'Keeffe said the majority of pubs in Ireland do not serve food and would not benefit from the Vat cut.

“With pubs continuing to close their doors for good all around the country, we would ask that the Government keep this in mind ahead of their formulations for Budget 2027. We will certainly be pressing for an excise reduction for those businesses in the months ahead,” he said.

Ahead of the rate cut, twin sets of data report a sharp drop in hospitality business closures. PwC reported on Monday that hospitality insolvencies during the first half of the year had declined by more than 26%, compared to the same period in 2025.

Separate analysis from Deloitte reports hospitality insolvencies have dropped by 14% compared to this time last year

They said the average company age across all insolvencies was 14.5 years, but it was 10.5 years in the hospitality sector.

James Anderson, turnaround and restructuring partner at Deloitte Ireland, said hospitality businesses accounted for 13% of insolvencies, and the majority were bars and restaurants.

“While I do not expect the Vat rate cut for hospitality to have an impact on insolvencies, it is interesting to see a drop in insolvencies in this sector," he said.

"Two potential reasons may be businesses holding out for the summer period or the Vat rate cut. The following quarters will need to be monitored closely to confirm if the tax measure has any effect. What hasn’t changed for the sector is difficulty attracting and retaining staff members, alongside cost pressures, such as the price of energy."

The Vat change is expected to cost the exchequer €232m through the rest of this year and €681m over a full year.