The new rate forms part of initiatives outlined yesterday by Minister for Finance Michael Noonan in the government’s Jobs Initiatives, designed to boost job creation.
Ireland’s restaurant industry has welcomed the initiative, saying that “the many positive measures (…) will boost confidence, get people back to work and revitalise the tourism sector.”
“The tourism sector can make a substantial contribution to our economic recovery,” said Adrian Cummins, CEO of the Restaurants Association of Ireland.
VAT will be reduced from 13.5 per cent to 9 per cent for goods and services related mainly to the tourism sector.
Amongst those to benefit from the new rates are restaurants and catering services, as well as accommodation and admission charges to tourist attractions, entertainment and sports venues.
“The cut in VAT by 4.5 per cent will provide a significant boost to the tourism and hospitality sectors,” said Cummins.
“It is a sensible approach to have a meaningful VAT reduction of a targeted nature, rather than a very small cut spread more thinly.”
The Restaurant Association of Ireland, which represents around 700 restaurants with over 63,000 employees, will instruct its members to pass on the VAT reduction on to consumers from 1 July 2011 when the new rate comes into force.
The government will also halve the lower rate of employers’ PRSI on jobs paying up to €356 per week from 8.5 per cent to 4.25 per cent, which is expected to cut the cost of hiring.
The Jobs Initiative also included plans to abolish the €3 travel tax, which is expected to help boost travel to the region.