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Dáil
‹ Ceisteanna ó Cheannairí - Leaders' Questions

Hospitality VAT reduction

Summary

Jennifer Whitmore and Seamus Healy criticised the hospitality VAT cut as an unnecessary subsidy benefiting large chains, while seeking more targeted support. The Tánaiste defended the 9% rate as essential help for small businesses and regional jobs, and rejected calls to reverse it.

McDonald's do not deserve it and I know that the cafés in Wicklow will agree that McDonald's does not deserve millions of euros of their money.

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Simon Harris The Tánaiste Fine Gael

I can produce the image. The Social Democrats are going to vote against a measure to help with jobs in towns and villages across Ireland and I do not think that was a very good thing to do.

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Deputies

Hear, hear.

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I respectfully ask the Tánaiste to reflect on the decision to reduce the VAT rate for the hospitality industry. On mature reflection, the Government might reverse this totally baseless and unbelievable decision. The State is proposing to gift millions of euro to a very small number of very large and very profitable businesses. I suggest that the Government fell for a fierce lobbying campaign that was effectively a scam. There is no crisis in the hospitality industry. Small local cafés and restaurants have a legitimate case for support but the main industry is thriving. The facts speak for themselves: as profits in this country between 2019 and 2025 are up by 72%; 73% of small and medium enterprises have reported making a profit higher than pre-Covid years; employment is up; and hospitality is up by 6.8%, while the national figure is 3.5%. It does not look like a crisis. There are 15,370 businesses in food and beverage services. Of these, 99.8% employ fewer than 250 people, making up 85% of the turnover. What we have is the State subsidising a very small number of very large, very profitable businesses. To give a few examples: McDonald's, profits up 17% to €42.4 million, a gain of €20 million; Supermac's, profits up 28% to €43.6 million, a gain of €12.5 million; Domino's, €280 million Irish turnover, a gain of €12.5 million; Krispy Kreme, a gain of €635,000; Compass Catering, €130.4 million turnover, a €5.8 million, and Sodexo, profits up by 44%, a gain of €5 million. These six large companies share €54 million of a windfall gift from the Government, in a country where we have 640,000 people living below the poverty line, including 190,000 children. Will the Tánaiste accept that the Government has, let us say, made an error in judgment or a miscalculation, or even that the Government was misled, and reverse this totally unnecessary decision and bring forward a targeted proposal to support small, local cafés and restaurants with moderate turnover?

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Simon Harris The Tánaiste Fine Gael

I will not accept that at all. I will accept that we will do what we promised the people we were going to do in the general election. Not too many of us in here, including myself, have had to lie awake at night wondering how we are going to pay the wage bill. Not many of us have to wonder that if we get sick and cannot run the café where our income is going to come from. Not too many of us have had to worry about the insurance cost of running a small business. In general, people come in here with good ideas about how they are going to come up with new policies that will increase costs for small- and medium-sized businesses. That is fine if that is what they want to do, but it is not the politics we practice. The services in this country - education, health, social welfare, pensions, carers, our salaries - are all funded on the back of people who run businesses. Breaking news: enterprise and creating profits are good things. Employing people is a really good thing.

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Huge profits.

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Simon Harris The Tánaiste Fine Gael

We have very different economic ideology and I will not debate that in the two minutes available to me. As the Deputy rightly said, 75% of the businesses in the hospitality sector employ fewer than ten people. If I walked around the Deputy's constituency with him, which I would be happy to do some time, it would be a brave politician who stood on the floor of the shop, café, restaurant or pub that is opening to do a bit of lunch for the local community and tell it that everything is flaithiúlach and grand and that it does not need the bit of assistance. The Deputy knows how European VAT-----

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Bring in a targeted measure.

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That would be too much work for them.

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Simon Harris The Tánaiste Fine Gael

No, it would not. To be clear in case Deputy Newsome Drennan has not read her own party's alternative budget, Sinn Féin proposed this as well, so Sinn Féin is in favour of this and agrees with us on this one. The rate of 9% is supported by Sinn Féin as well, so I thank her for that support.

Deputy Healy does not support it and that is his right. On balance, we think this is the right thing to do. Some 191,000 people are employed in this sector directly in 20,000 businesses. The Deputy is right, some of them are large businesses and that is the same when any measure is introduced. Seventy five percent are not, with only 0.4% classified as large companies. Even the large businesses, heaven forbid, create good jobs as well, in every town, city and village. These jobs often lift people out of poverty because the best way to do so is to get them a job. Many of the large companies that I have heard mentioned in this House in recent days are franchises run by Irish people. They are Irish owned and, yet again, they create jobs. Too many people in this House are taking job creation for granted. I remember that when I first got elected to the Dáil, it was hard to get a job in this country. We are back at full employment and we have to make sure we back businesses and reduce their cost bases. This is a practical measure. We are not reducing it for just a year or two. This is a permanent reduction to reassure business owners across the country in the hospitality sector that we have their backs and are reducing their cost bases and to drive on and keep and grow those jobs in towns and villages around the country.

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Deputies

Hear, hear.

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The Government is proposing to spend €681 million on what is clearly an unnecessary and wasteful cut. At the same time, the Government has raised tax on PAYE workers, reneged on its commitment to abolish the means test for carers and reneged on its commitment for a weekly cost-of-living disability payment. The Government has cut all cost-of-living supports in the budget. There is no second tier of child benefit to tackle child poverty or no maximum of €200 per month for child care costs. Very profitable fast-food giants are benefiting at the expense of poor children, carers, persons with disabilities and PAYE workers. Does the Government have the political will and, indeed, the good sense to reverse this decision, stop paying hugely profitable multinational organisations and bring forward a targeted scheme that would support local cafés and restaurants with moderate turnovers?

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Simon Harris The Tánaiste Fine Gael

We are not going to agree on this, so no, the Government does not intend to reverse the commitment it gave and is delivering on, but it needs to be seen in context. This is an important measure to back business and jobs in regional and rural Ireland. It is also just one of a number of measures. The budget allocated a hell of a lot more to childcare, disability, education and health than it did to this measure. In addition, we have also taken very important measures to protect those most in need. The minimum wage will increase for 200,000 workers. All workers will now have an automatic entitlement to a pension as auto-enrolment begins. We are continuing to drive down the cost of education. We are moving towards the abolition of the carer's means test.

I reject out of hand what Deputy Healy said about that because we took the first step in the budget, with an increase in thresholds to €1,000 for a single person carer and €2,000 for a couple.

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Simon Harris The Tánaiste Fine Gael

Please do not mislead carers. Family carers deserve to know the truth and this is the truth.

We have frozen VAT at 9% for gas and electricity for the next five years and we are making sure an extra 50,000 households throughout the country will benefit from the fuel allowance. We are extending the renter's tax credit. We have the back of Irish people and the back of businesses. Crucially, the measures in the budget most proportionately favour the most vulnerable in our society and that is the way it should be.

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