Disappointment as Finance Minister rules out VAT cut for food businesses – Naughten

In Business & Jobs, Local Issues, News, Posts by Topic by Denis Naughten

Urgent Call to Action: Save Our Small Businesses Now!


In a shocking revelation on the floor of the Dáil this week, the Minister for Finance has dismissed the plight of Small and Medium Enterprises (SMEs) across the nation, says local TD Denis Naughten.


Despite heartfelt pleas from struggling businesses across the region, the Minister in the Dail this week said that there are “no plans to change the VAT rate… that is not going to happen”, leaving countless businesses teetering on the brink of closure without the lifeline they desperately need.


“I, along with my Regional Group colleagues, stand united in our frustration and disappointment, because we are seeing first hand the devastating toll that high VAT rates are taking on food businesses within the hospitality sector. This is compounded across all business with the failure to address employers PRSI anomalies,” said Denis Naughten.


He continued: “However, with a critical Private Members Debate looming next Wednesday morning in Dáil Éireann, there’s still a glimmer of hope that the government might reverse its stance and provide the essential support SMEs urgently require.


“My colleagues and I are calling for an immediate reduction in the VAT rate from the punitive 13.5% to a more manageable 9% for food businesses, aiming for relief before Easter. We also want a lower rate of employers’ PRSI to apply across all business to cover the full national minimum wage level. This is not just about numbers; it’s about survival. Our local retailers and restaurants, the heart of our towns and villages, are facing unprecedented challenges. Many have already been forced to shut down, not only costing precious jobs but also eroding the charm and vitality of our communities.


“Local family-run businesses are more than just commercial entities; they are the cornerstones of community interaction and social cohesion. Their decline signifies not just an economic loss but a profound social one. The Government’s failure to act not only jeopardises these enterprises but neglects the invaluable social fabric they weave in our lives. SMEs are not merely a segment of our economy; they are its very pulse.


“As the debate approaches, my colleagues and I are adamant about championing the cause of SMEs. Our motion is clear, it’s time to stand by the businesses that serve as the backbone of our local economies and communities. We cannot allow the Government’s inaction to dim the vibrant spirit of our nation’s towns and villages,” continued Denis Naughten.




Notes to editor:

The debate will take place Wednesday the 14th at 10 am


Motion wording:

That Dáil Éireann


recognises that:

  • Micro and Small and Medium Enterprises (SMEs) are a critical pillar of the Irish economy;
  • the people who create and lead SMEs throughout the country are incredibly diverse; from family-owned businesses, rural-owner managers, traditional to high growth and technology start-ups;
  • there are more than 1.2 million people employed by SMEs in Ireland;
  • SMEs represent up to 99.8% of active enterprises with 69.2% persons employed, which generated 41.5% turnover, and GVA (Gross Value Added) of 34.8% in 2021; [1]
  • the vast majority of these enterprises are micro-sized enterprises that employ less than 10 people;


notes that:

  • Government policy decisions have increased the cost of doing business particularly in the SME sector significantly;
  • many SMEs including rural and regional micro, small and medium sized businesses are facing significant cost challenges;
  • PwC[2] recently predicted that the number of business insolvencies would grow to 1,000 this year with the retail, hospitality, and construction sectors coming under particular pressure;
  • input costs due to the increases in energy, inflation, insurance, cost of labour, national minimum wage increases, higher PRSI, plans for pension auto-enrolment, extended sick-pay entitlements on top of VAT increases, along with many other input factors are making it very difficult for small businesses to continue trading;
  • a recent IBEC survey[3] found that additional costs associated with energy, inflation, and labour were leading concerns for businesses in the hospitality, retail, travel, food, drink, tourism, and entertainment sectors;
  • increased wage levels for those on employment permits will have additional implications for the food processing, horticulture and healthcare sectors;
  • a combination of higher costs will lead to rising prices and closures;
  • the present challenges to business viability in the restaurant and hospitality sector has the potential to significantly affect tourism this year;
  • increases in the national minimum wage, will not address the cost-of-living issue for employees because in the absence of access to affordable housing, most increases in wages will go to pay increased housing costs;


calls on the Government to:

  • immediately establish a taskforce representative of micro and small business with Government departments and agencies personally chaired by a Cabinet Minister to review the application of all Government controlled costs and to reduce Government charges and costs of doing business, with quarterly updates provided to the Joint Oireachtas Committee on Enterprise;
  • as an interim measure:
    • reduce the current VAT rate of 13.5% to 9% for food businesses in hospitality sector before Easter;
    • ensure the 8.8% employer’s PRSI rate cover the full national minimum wage level by increasing the 11.05% threshold from €441 to €495.30 per week, commencing before Easter;
    • expedite the work permit process and abolish welfare traps which will greatly aid staffing shortages;
    • revise the debt warehousing scheme to allow longer repayment schedules and preferential interest rates to retain business viability and sectoral employment;
  • develop an action plan for financial education to strengthen the financial management skills of small business owners and managers;
  • create a panel of industry expert advisors and mentors for SMEs partially funded by the State;
  • expand access to credit initiatives for SMEs; and
  • enhance flexibility in government procurement of state services to permit departments such as Education, Health, Defence, and Local Government to procure supplies from local suppliers, as opposed to relying solely on central purchasing.