Reinstate 9% VAT rate for restaurants or jobs will be lost in Mayo - warning
THE Restaurants Association of Ireland (RAI) has issued a strong warning to government ahead of Budget 2026: it must fulfil its promise to reinstate the 9% VAT rate for food-led hospitality businesses or face the consequences of further closures, job losses and long-term damage to Ireland’s tourism economy, particularly in counties like Mayo, where restaurants, cafés and gastropubs are vital to rural life and economic survival.
The closure of food-led businesses in Mayo is contributing to the hollowing out of towns and villages, increasing rural isolation and weakening the social fabric of communities.
The RAI has launched its pre-budget submission, outlining urgent policy measures needed to safeguard thousands of restaurants, cafés and gastropubs across Ireland. The submission highlights the specific risks faced by counties like Mayo, where food-led hospitality is a key employer and community anchor.
At 13.5%, Ireland has one of the highest VAT rates on food services in the EU. The estimated €545 million cost of restoring the 9% VAT rate should be viewed as an investment, not a loss. Independent analysis by leading economist Jim Power shows that the closure of 500 restaurants could result in a €680 million hit to the wider economy when job losses, tax revenue decline, and increased welfare dependency are considered.
Despite spiralling costs, menu prices in the sector have risen only modestly, by just 3.3% in the past year and 29.8% over five years, well below actual cost inflation. Businesses are absorbing massive increases because they know customers can’t afford more.
One example: while coffee commodity prices have risen by 156% since October 2023, consumers haven’t seen anything close to that reflected on menus.
According to the RAI’s Cost of Doing Business Survey, input costs between 2022 and 2025 have soared:
Fruit & Vegetables: +50%
Chocolate: +157%
Chicken: +35%
Beef: +95%
Pork: +35%
Gas prices: +58%
Electricity costs: +96%
In the face of these pressures, the RAI is urging government to act. Key asks in Budget 2026 include:
* Reinstatement of the 9% VAT rate for food-led hospitality businesses
* Ensuring future increases to the national minimum wage are aligned with inflation
* Halving the employer PRSI rate for one year to relieve cost pressures
* Support for food tourism promotion and the creation of a Food Tourism Strategy, backed by €400,000 in initial funding
* Urgent insurance reform to address unaffordable liability premiums
* Reforms to Benefit-in-Kind (BIK), including exemptions for employer-provided accommodation and small staff events
More than 200 restaurants have already closed in 2025. The average food-led business in counties like Mayo employs 22 people and contributes to a broader economy that sustains more than 220,000 jobs. In rural counties like Mayo, closures accelerate rural decline, limit social connection and further isolate vulnerable groups.
Said Adrian Cummins, CEO of the Restaurants Association of Ireland: “Budget 2026 must be a turning point. Temporary measures are not enough. We need a pro-SME, pro-hospitality budget that supports survival now and enables long-term growth.
“Restaurants are more than businesses, they’re the heart of communities, tourism and culture in counties like Mayo. But high VAT, soaring input costs and government-induced pressures are pushing many to the brink.
“Bringing back the 9% VAT rate, as promised by government, is essential. Tánaiste Simon Harris called it a solemn commitment; now it’s time to deliver.
“If we lose our food-led businesses, we lose not just jobs and investment, but the very soul of rural life. The knock-on effects of closures in Mayo include rural isolation, lost tourism revenue and irreversible damage to town and village centres.
“The data is clear: businesses have absorbed wave after wave of cost increases to protect staff and customers. But they can’t take any more hits. Without urgent action in Budget 2026, closures will escalate, including in Mayo.”