Michael McGrath pours cold water on 9pc VAT extension as Eamon Ryan says we must be sensible

Finance Minister Michael McGrath has voiced doubt that the special 9pc VAT rate can be held in hospitality — when it is set to rise by half to 13.5pc in just four weeks.

His caution came as Green Party leader Eamon Ryan doubled down on his Dáil comments that people would be “weaned” off their autumn supports in response to the energy crisis and cost of living.

Mr McGrath said the combined cost to date of the reduction in VAT on household gas and electricity bills, together with the cut in excise on petrol and diesel, had been almost €800m.

“The cost by way of tax foregone of the 9pc VAT rate in the tourism and hospitality sector since it was introduced as a Covid measure in November 2020 is €900m,” said Mr McGrath.

“Taken together, the sums involved are very large, so we need to decide how taxpayers’ money can best be used in the round to provide supports to help people and businesses get through this period of high prices and input costs.

“For this reason, I expect there will be some changes at the end of February.”

Mr McGrath’s reference to the special VAT rate as a Covid measure alarmed the Irish Hotels Federation (IHF), which pointed to a poll showing that two-thirds of people (66pc) now believe the current rate for hotels and restaurants should be extended, with less than a quarter (23pc) against.

IHF President Denyse Campbell said: “It is very worrying that the Government is contemplating an increase when many of our key tourism markets are experiencing a cost-of-living-crisis.

“Increasing consumer taxes such as tourism VAT is the last thing we should be doing at this point. People in Ireland and across our overseas markets are already being squeezed by exceptionally high levels of inflation and other pressures on their finances.”

However, Mr McGrath supported the Taoiseach’s assurance that there would be no cliff-edge, whereby all supports would end on February 28.

“I think it’s clear we will have to continue to provide some level of support through the month of March and beyond,” he said. “I believe the focus should be on helping with the cost of living pressures that are still very much there.”

The Green Party leader refused to be drawn on which specific measures would be maintained while others would fall away. Appearing in a leaders’ interview slot on This Week on RTÉ Radio 1, Mr Ryan said decisions would be taken in the coming weeks.

He said at least 12 measures had been introduced in the last year to help people through “this wartime, high cost-of-living period”.

But he added: “There has to be significant change. We do have to maintain economic stability and the ability to react to any future crisis by by having a tax base and an appropriate economic approach.”

The energy credits on bills had really worked and were a very effective mechanism, he said. “So if we were to continue them, the question on that would be very much timing-orientated and depends on what’s happening in the energy markets.

“There has been a significant drop in the international gas market price in the last six weeks.

“Now we don’t know how long that will last, and it will take some time before it kicks into lower bills.

“You’re best to hold your fire until those periods when the bills are at their highest — going into the winter period.”