Taoiseach warns restaurants he wants to see Vat cuts reflected in customers' bills

Micheál Martin also vowed there would be support for those on lower incomes to support them with the cost of living and energy prices

Taoiseach Micheál Martin said there would be a social protection package in the budget. Picture: Mark Stedman

Taoiseach Micheál Martin has warned restaurants the Government wants any prospective Vat cuts in Budget 2026 to be reflected in customers’ bills.

During an interview with the Irish Examiner in Copenhagen, he stressed while a Vat cut had not been agreed, the Government accepted worker protection measures had added to the cost of doing business.

He also vowed there would be support for those on lower incomes to support them with the cost of living and energy prices, but acknowledged meetings between public expenditure minister Jack Chambers and line ministers have been “tough”.

Negotiations for Budget 2026 will continue this weekend ahead of Tuesday’s announcement.

The hospitality industry has lobbied for Vat to be permanently reduced from 13.5% to 9%.

It is expected that if introduced, it will be delayed until July to reduce the price of the first year to €330m.

While the Irish Fiscal Advisory Council (IFAC) noted earlier this week restaurants were more likely to pass on cost hikes to customers than cuts, the Taoiseach indicated this should not be the case.

“Anything we do is around viability of businesses and to make sure businesses can continue,” he said.

“It is a revenue, it is a tax. The business model should not be dependent, in terms of the profits and so on, on such a tax.

“Be that as it may, we would like to see anything we do, if something was to happen, that it should be reflected in the pricing.

“But again, there have been cost pressures on the industry, that has to be acknowledged.”

This, he said, included the rise in the minimum wage, mandatory sick days, a new bank holiday and the impending roll-out of auto-enrolment for pensions.

IFAC also said the proposed full-year cost of the Vat package could fund a €3,000 increase in the standard tax rate, which would give workers an annual €600 boost.

Asked if people would be €600 better off this year, Mr Martin said he was “not going to announce the budget”.

He said IFAC’s “overall point” was that there “has to be sustainability in public finances” and this is why the Government “is moving away from the one-off packages”.

He argued inflation had fallen to 2% and further measures would “create a further inflationary cycle”.

“That's not something we're prepared to do,” he added.

Following the publication of the National Development Plan review in July, Budget 2026 will have an emphasis on capital projects, including housing, water, and energy infrastructure.

“People will be better off from that perspective,” Mr Martin said.

“But I accept that's not in the here and now.”

“There will be a social protection package. That will be designed to try and cushion people and protect people, particularly those who are most vulnerable and middle to low incomes.

“They'll get some benefits to try and protect them against the increases in the cost of living, in energy prices.”