The reduced 9 per cent rate for hospitality and tourism is set to expire at midnight.
It will return to 13.5 per cent. The reduction was introduced back in November 2020 to help businesses struggling amid the pandemic and was further extended in February of this year.
Despite pleas from businesses representatives to retain the reduced rate, the increase is set to kick in tonight. Restaurant and pub chiefs have blasted the hike as the "nail in the coffin" for many small businesses.
Chief Executive of the Restaurants Association of Ireland Adrian Cummins said: “The increase is wrong at a time when the country needs to reduce inflation, a VAT increase only adds to inflation.
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"Government need to restore the 9% VAT for Food related Hospitality businesses in Budget 2024 and we will me making the case for this when we meet with the Minister for Finance next week. The increase the vat rate is the final nail in the coffin for many small cafes, restaurants and food led pubs.”
Meanwhile Donall O’Keeffe, Chief Executive of the LVA, warned that the hike "will effectively see menus changed across the country".
"With the Exchequer in such a strong position, there was no reason why 9% VAT on food couldn’t have been maintained," he said. "Research conducted by Red C earlier this summer showed that 6 out of 10 members of the public wanted the 9% VAT rate to continue, so this move clearly doesn’t have public support.
“Where this will be most keenly felt is in the discretionary activity like enjoying lunch or dinner in local pubs, cafes and restaurants. When the pinch in business is felt in hospitality around the country over the months ahead, they will know this was specifically applied by the Government."
The extension of the reduced rate is estimated to have cost the Exchequer €300m in tax revenue foregone.
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