Fine Gael has rejected suggestions that its new VAT plan will trigger higher gas and electricity prices for households and business, as claimed by Fianna Fáil.
Fine Gael proposed today raising VAT from 9% to 11%, and putting the hospitality sector on the lower rate to ease pressures on cafes, restaurants, entertainment and hairdressers.
The hospitality sector was on the lower 9% due to the Covid pandemic but is now back on the higher rate of 13.5%.
Sinn Féin, the Social Democrats, Independent Ireland and Aontu all claimed that the 11% rate will not be enough assistance for a sector which seen 600 restaurants forced to close since the Coalition re-instated the 13.5% rate.
They also criticised Fine Gael for proposing changes to help the hospitality sector only weeks after doing nothing for such businesses in Budget 2025.
Fianna Fáil said it opposed the measure because it claimed it would directly lead to a 2% increase in the energy bills of every business and every household in the country.
The party's finance spokesperson Jack Chambers described the Fine Gael plan as "regressive."
However, tonight, Fine Gael countered that its proposed 11% VAT rate would have no impact on gas and electricity prices - for either households and business.
Party sources said the vast majority of businesses can claim back all of the VAT on utility bills.
Additionally, it was made clear in Budget 2025 that the 9% rate of VAT for household utilities would increase to 13.5% in April 2025.
Fine Gael plans to introduce its 11% rate at the same time next April, and claims its manifesto will contain a cost-of-living package which will more than offset the impact on households.
Fine Gael party leader Simon Harris said the VAT measure would happen within 100 days of taking office, as the bottom line of many small and medium sized businesses are tight.
The party said it will also introduce a temporary three-year measure to provide a PRSI rebate for businesses with fewer than 50 staff.
Paschal Donohoe promised that Fine Gael would create 300,000 extra jobs over the lifetime of the next government, bringing overall employment to three million.
Asked why the VAT rate was not introduced in the recent Budget, Mr Harris said that "we were in a three-way coalition" and it was not possible to achieve in one budget cycle.
But he said the new VAT rate would be "baked into" the fiscal framework for a full term in government.
Mr Donohoe said hotels are excluded because "choices had to be made" but he said that hotels would benefit from the reduction in VAT on the cost of food.
The Fine Gael candidates were speaking at a business policy launch this morning before Mr Harris travels to canvass in the southeast.
Fianna Fáil leader Micheal Martin said he was not opposed in principal to the VAT rate changes, but was concerned such a measure could increase energy prices.
Speaking at the Douglas Shopping Centre in Cork this morning, Fianna Fáil leader Micheál Martin said that the problem with Fine Gael's VAT proposal is that it has a knock-on effect for small businesses.
"Everyone is concerned about cost of living and fuel prices and energy costs," he said, and lowering the VAT rate means you have to raise it for other sectors to meet it and this has an impact on small businesses like gyms, he added.
SF accuses FG of making up policy on the back of an envelope
Party leader Mary Lou McDonald was in the southeast as her party made a pitch to voters that it is now time for a government without either Fianna Fáil or Fine Gael.
She accused Fine Gael of making up policy on the back of an envelope and said her party has already committed to reducing the hospitality VAT rate to 9%.
Ms McDonald said it was extraordinary that Fine Gael was announcing this policy proposal after just passing a Finance Bill.
She said that people have an opportunity to vote for what she described as "real choice" and "change" in this election, by voting for Sinn Féin.
Ms McDonald reiterated her party's preference to see a new government that does not involve Fine Gael or Fianna Fáil, however she has previously stated that she will engage with all parties when it comes to possible coalition negotiations.
The Social Democrats are advocating that, if in government, they would seek to reduce VAT on the food and beverage sector to 9%, but not apply it to accomodation businesses.
Explaining why hotels should be excluded, party leader Holly Cairns said: "A major hotel in Dublin, charging exorbitant rates for rooms, cannot and should not be compared to a small cafe in West Cork."
She said: "Small hospitality businesses are the backbone of so many of our cities, towns and villages. Regrettably, many of those businesses are now facing closure – with hugely negative impacts on staff, suppliers and the wider community.
Ms Cairns said she accepted that VAT is "a blunt instrument" but added her party's proposal "... is an emergency measure, designed to get support to businesses quickly, and is necessary to stop the closure of otherwise viable businesses."
Martin says Fianna Fáil will expand garda force by 5,000
Fianna Fáil leader Micheál Martin also confirmed today that his party will expand the garda force by 5,000, adding that this would be the largest expansion of the gardaí ever.
He said he is meeting people on the street who tell him they are worried about crime and anti-social behaviour.
He said there is a need to expand and resource the gardaí effectively as there is a rising population and to ensure that the perception of safety in our villages and towns is enhanced.
Meanwhile, Labour leader Ivana Bacik and People Before Profit leader Richard Boyd Barrett took part in the national march for Palestine at the Garden of Remembrance in Dublin.
Ms Bacik said that if her party forms part of the next government they would ensure the passage of the Occupied Territories Bill.
Mr Boyd Barrett said that Gaza is a "redline" issue for the next government.
The dominant issues already emerging in this election are housing, the cost of living and the spending of public money while the conflict in the Middle East has also been prominent.
Political parties and independents have just under three weeks to tell voters about how they plan to improve matters.
Additional reporting Tommy Meskill, Evelyn O'Rourke
