Restaurants relieved at VAT increase delay
RESTAURATEURS and hotel owners have expressed relief that a VAT hike has been postponed until February of next year at least, as the Government fears there’s a ‘dark winter’ ahead, with costs of living to rise even further.
The soaring cost of food and energy, combined with staff shortages and delays of months in getting work permits, has massively dented the industry’s longed-for post-pandemic ‘bounce-back’.
Finance Minister Paschal Donohoe said the 9% VAT rate will stay until the end of next February at a cost of €250million. It had been due to end in August, with the VAT rate climbing back to 13.5%.
Mr Donohoe said the move is partly to help businesses in receipt of the Employment Wage Subsidy Scheme, which is being axed at the end of May. Most of the 4,000 businesses still on the scheme are in hospitality and collectively
‘Challenges with staff shortages’
employ 114,000 people, he said.
He added that it was important to ensure the tourism sector can rebound from the pandemic, amid concerns about rising inflation.
‘The reality is that a change in VAT across the summer period runs the risk of adding to the challenges that many are now facing in the cost of living, and also runs the risk of adding pressure to employers who are just exiting from a very, very significant support scheme,’ he said.
Green Party leader Eamon Ryan, speaking on his way to Cabinet yesterday morning, said the rate would not be hiked ahead of the ‘dark winter’ – and a ‘difficult’ time for hospitality. ‘We don’t want to change it then,’ he said. ‘So I think it will be timed in a way that gives the hospitality sector the best chance to get back on its feet.’
The rate was reduced from 13.5% on November 1, 2020, to help businesses under pressure due to pandemic-related restrictions.
Emphasising the challenges facing the sector, Dublin tapas bar Las Tapas de Lola posted on social media: ‘Every day we receive four to five mails re price increases – everything from bread to utilities to deliveries – and the minimum increase to date is 15%, the majority up around 20 to 30%. Shocking to think where this will all end up – let alone by end of the year but by summertime.’
Following the VAT hike postponement, Restaurants Association of Ireland chief Adrian Cummins said: ‘This decision to extend the rate is welcome at a time when hospitality businesses face rising input costs and inflation.’
Fine Gael senator Martin Conway said the 9% rate should be made permanent ‘to ensure we have a thriving industry going forward’. ‘Some tourism and hospitality businesses are encountering massive challenges with staff shortages as they try to prepare for the busy summer period and retrain new staff to replace those who might have left over the last two years,’ he said.
David Heaton of Heaton’s Guesthouse in Dingle, Co. Kerry – which was rated as one of Ireland’s top three small hotels this week by Tripadvisor – said the extension of the 9% rate was ‘fantastic’.
‘It’s not too bad here in Dingle, but a lot of places are really struggling, and it [the rate] makes a big difference,’ he explained.
He said everyday prices for basics such as meat and eggs are rising and he that he fears for the supply and the cost of items such as vegetable oil and flour later in the year when the effects of the Ukraine war are fully felt.
Pat Crotty, of the Paris Texas bar and restaurant in Kilkenny, said the VAT rate freeze was ‘hugely critical’ for the industry.
He said it would save him having to increase his prices for the time being. Mr Crotty told Claire Byrne on RTÉ Radio: ‘We are deliberately trying not to put up our prices because Kilkenny is a small place and we depend on people coming back week in week out, day in day out, and if we make it that they can’t afford it, then they will need pay increases and we won’t have a business.’
‘Trying not to put up our prices’