Letterkenny coffee shop owner and estate agent Brendan McGlynn was one of the first businesses to make customers aware of the drop in VAT from 13.5% to 9%.
Brendan welcomed the move by putting up signs in his shops telling people of the new prices.
“We have introduced a number of deals in our two coffee shops to give people as much value for money in the current climate.
“We are more than happy to pass on the VAT reduction to our customers.
“Hopefully other businesses in Letterkenny and Donegal who do the same will feel the benefit,” he said.
The new VAT rate part of the Jobs Initiative and the Government hopes it will help to stimulate the struggling sectors.
The reduction will stay in place until December 2013, when it will be reviewed.
Minister for Tourism Leo Varadkar has warned businesses they must pass on the savings to customers.
Minister Varadkar said the VAT reduction was ‘hard fought for’, and a failure to implement it will make it difficult for similar supports to be given by Government.
He said the VAT cuts are a legal obligation, even if price cuts are not. However, the minister said he expects business to respond positively.
The new rate applies to restaurants and catering services, hotel and holiday accommodation, entertainment venues, as well as hairdressing and printed publications, including newspapers and magazines.
The Irish Hotels Federation has called on all members to pass on the reduction.
The Restaurants Association of Ireland said it has instructed its members to reduce prices accordingly.
Bord Failte’s Paul McLoone said he hopes businesses in Donegal and the North West in general will also pass on the reductions to their customers.