LAST UPDATE | 1 Oct
THE GOVERNMENT HAS rejected calls from the hospitality sector to reduce the VAT rate to 9%.
VAT for the tourism and hospitality sectors was reduced to 9% during the Covid-19 pandemic at a cost of €1.2bn to the exchequer.
The previous 13.5% rate was reinstated last August, despite the sector’s opposition.
Talks had been ongoing yesterday to reduce to VAT rate in the sector to 9% but no such reduction was forthcoming in today’s Budget announcement.
The Vintners’ Federation of Ireland said it was “gravely concerned” that there is no reduction in the hospitality VAT rate and that measures announced today “fall disastrously short of what is needed to protect a sector on the brink”.
CEO of the VFI Pat Crotty described the Budget as a “disaster for our sector”.
“For pubs to survive our members needed to hear that VAT would be lowered to 9% along with a reduction in excise duty,” said Crotty.
The VFI said that without “more targeted financial interventions, many more pubs will not survive the coming months”.
The Licensed Vintners Association meanwhile said the Budget “shows how little the Government has been listening to the hospitality sector”.
“A so-called ‘Giveaway Budget’ which gives hospitality nothing, again illustrates how much of an afterthought we are to the decision makers around the Cabinet table. So much for all their claims of hearing our concerns,” said Donal O’Keeffe, CEO of the LVA.
Elsewhere, the Restaurants Association of Ireland (RAI) called the decision to not reduce the VAT rate as a “devastating blow to a sector already in crisis”.
The RAI today said 612 restaurants, cafés, gastropubs and other food-led businesses have closed since the VAT rate was increased last year and it claimed that over 1,000 more could close over the next year.
“Arriving on top of significant increases in the minimum wage, paid statutory sick days, the upcoming pension auto-enrolment scheme and sky-high energy and food costs, the VAT increase proved the final nail in the coffin for many,” said the RAI.
The Irish Hotels Federation (IHF) also expressed “deep disappointment” and said the Government “has failed to respond in any meaningful way to the commercial crisis facing hospitality food-led businesses”.
IHF President Michael Magner said the Budget “does next to nothing to address the enormous challenges confronting our sector while at the same time imposing further costs on thousands of hospitality businesses”.
Magner described the decision not to reduce the hospitality VAT rate as “short-sighted and extremely concerning”.
“These businesses are facing a perfect storm as they grapple with rising costs, the impact of the 13.5% VAT rate and very tight margins,” said Magner.
He added: “The bottom line is that inaction now poses an enormous risk to our wider hospitality and tourism industry which, as one of Ireland’s largest indigenous employers, supports over 280,000 livelihoods some 70% of which are outside of Dublin.”
Meanwhile, remarking on the €4,000 energy subsidy business payment, Magner said: “At just under €77 per week, this just demonstrates how out of touch policymakers in Government are with the commercial reality facing hospitality businesses.
“It falls so far short of what is needed, that it will have almost no impact.”
Independent TD Mattie McGrath echoed the concerns of the various groups representing the hospitality sector, criticising the government’s decision not to lower the rate of VAT as having a serious effect on businesses in rural Ireland.
“With 69% of this industry located in rural Ireland, its health is crucial not just for local economies but for the national economy as a whole,” McGrath said.
He attacked the “giveaway budget”, saying that the government had ignored the “plight” of the tourism and hospitality sector.
“With over 615 restaurants closing in the past year alone, this sector is crying out for relief. Yet, the government remains tone-deaf to their concerns.”
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