When Budget 2026 is announced on 7 October, it will be the first time the current government will have an opportunity to show the people where its priorities lie when money is on the line.
One thing, heavily tipped to happen in this Budget is for restaurants and food-serving businesses to see their VAT rate reduce from 13.5% to 9%.
"We really need it as an industry," Lorraine Heskin, owner of Gourmet Food Parlour, said. The food and catering chain employs just over 300 people.
Speaking on RTÉ's This Week programme, she said its been "very difficult to absorb all the additional costs".
"Additional costs, not just in terms of food, but in terms of energy, diesel, petrol, overheads and operational costs.
"Even the cost of coffee has gone up over 150% in the last 12 months. We cannot pass all of those costs onto our customer. We've absorbed them."
The Government is allowing scope for €1.5bn of tax cuts in Budget 2026.
According to estimates from the Department of Finance's Tax Strategy Group, a VAT reduction for food and catering businesses from 13.5% to 9% represents a loss in tax revenue of €675 million.
In other words, 45% of that tax cut scope will go to the food and catering sector.
VAT reduction would be poor use of resources
Dr Laura Bambrick, social policy officer at the Irish Congress of Trade Unions (ICTU) said that the food and catering sector is "not under stress" and that a VAT reduction for the industry would be a poor use of Government resources.
"The 9% rate will go to all businesses, whether they're big, small, profitable or struggling. It'll go to the two-person coffee van as well as the international global coffee chain," Dr Bambrick said.
"We can't keep putting the prices up on the customer plate."
If VAT remains at 13.5%, Ms Heskin said that things will be difficult for the food and catering sector.
"I think there's going to be some fantastic operators in this country that will not continue with their business," Ms Heskin said.
"We really, really need this and we hope that it will come through. We can't keep putting the prices up on the customer plate."
The food and catering sector is a large employer and the employment rate of the hospitality sector has grown by 6.6% year on year.
In the first quarter of 2025, over 13,000 more people worked in the hospitality sector (which includes food, catering and accommodation industries) compared with the first three months of 2023.
In 2023, the sector was operating at the lower VAT rate of 9% and minimum wage was €2.20 lower than it is today.
"This is a sector that employs the most amount of minimum wage workers," Dr Bambrick said.
"Government has delayed a living wage for these workers by three years.
"They have done a U-turn on the commitment to give them ten days paid sick pay.
"So workers are already paying a heavy price for government's Cost of Business package for the hospitality sector."
While VAT on food services is currently 13.5% in Ireland, across the border, and throughout the UK, the rate is 20%.
VAT is a charge paid by customers at the point of sale. When businesses have a VAT reduction, they are under no legal obligation to pass that discount onto their patrons.
Ms Heskin said that if VAT is reduced, she will use the savings in her business to reinvest in her staff and create a customer loyalty scheme.
"There will be certain things that we will be able to pass on [to the customer] 100%," she added.
Restaurants Association says 9% VAT rate is vital
Adrian Cummins, chief executive of the Restaurants Association of Ireland, said that a 9% VAT rate for the sector is vital.
"If the Government doesn't bring in the 9% VAT rate, that puts extreme pressure on a sector that is under extreme strain at the moment.
"From the cost of business, drop in customer demand, energy costs, insurance costs, our margins have been squeezed so much that many businesses just aren't making any profit at the moment," he added.
Mr Cummins is hopeful that the 9% VAT will come be announced in three weeks' time and that it will come into effect from 1 January 2026.
He said that restaurants reducing prices for customers is a matter for each business.
"We're facing the same as every consumer is facing in their in their retail grocery shop prices have gone up for our raw material substantially.
"These are the costs that we are absorbing into our business at the moment.
"To try and pass that on ... I think it will be very difficult for many many businesses because that will be the lifeline for keeping them open or not."
By reducing VAT for the food and catering sector, the Government would be reducing the tax base. That leaves less money for other Government priorities
"Budget 2026 is going to be an opportunity where we see what the Government's priorities really are," said Louise Bayliss, head of social justice and policy at St Vincent De Paul.
"We've heard an awful lot about child poverty being the Government's priority.
"We'll know when we see the expenditure and we can weigh it up against other priorities which one really is the priority," she added.
Reducing childhood poverty is in the Programme for Government. Earlier this month, the Government introduced a target to reduce childhood poverty by 3% by 2030, based on the consistent poverty rate.
The latest figure puts childhood poverty at 8.5%.
Ms Bayliss said: "That's a big gap to come down from 8.5% to 3%.
"So, unless we see those targeted measures [in the Budget], I don't know how that can happen.
"So, I suppose I'm looking at where is the Government's priorities and will it be towards VAT or will it be to child poverty?"
