The “Review of the 9% VAT rate: Analysis of Economic and Sectoral Developments”, published in July 2018 alongside the VAT Issues Tax Strategy Group paper, assesses the 9% VAT rate’s relevance, cost, value-for-money, impact to date and the estimated impact were it to be removed. The Department’s Review shows that employment and profitability in hairdressing increased over 2011 to 2016.
In addition, the main finding of the Department’s Review is that expenditure on 9% goods and services is particularly sensitive to income growth and to the economic cycle, more so than to price changes. An increase in the VAT rate applied to hairdressing therefore should not greatly impact demand in the sector. This is evidenced by studies which have shown that hairdressing services are twice the cost in Ireland compared to Northern Ireland, despite the fact that a 20% VAT rate applies to the service in the North compared to 13.5% here.