TD backs ‘looking at’ restaurant VAT drop

A RETURN of the 9% VAT rate for restaurants should be considered following hundreds of closures, Minister Neale Richmond has said.

The restaurant sector had campaigned for the reduced rate to return prior to the October budget, but it was not included in the package.

Junior Enterprise Minister Richmond has told the Dáil that ‘the VAT rate for food-based businesses should be looked at.’

The Restaurants Association of Ireland (RAI) has been warning that hundreds of food businesses are in danger of closing after 280 shut up shop in the past six months.

The temporary 9% VAT rate for the tourism and hospitality sectors was introduced in 2020 in response to the Covid-19 pandemic.

Its expiry date was extended several times, but it eventually returned to 13.5% last September, despite calls from the industry, particularly the food and tourism sectors, to keep the reduced rate.

The Government was reluctant to provide the 9% rate for the hotel sector, but says it would examine proposals to split the VAT rate so that restaurants could pay less.

Minister Richmond said in the Dáil this week that the cost of the reduced VAT rate for the entire

‘It basically takes away the net profits’

tourism and hospitality sector was €450million. ‘Sadly, too many businesses were simply doing too well and others were not in a position to be represented,’ he said.

Enterprise Minister Simon Coveney met with the RAI this week and its chief Adrian Cummins said: ‘Obviously there seems to be movements now within the Government. That’s from the feedback that they’re getting from their constituents, that the 9% VAT rate is the sticking point in terms of the closures of businesses.’

At the meeting, Waterford restaurateur Louise Buggy presented Minister Coveney with her books of account to show him her depleted profit margin after the return to the higher VAT rate.

‘We’re extremely worried about the sustainability now of the business,’ she says. ‘The VAT basically takes away the net profits.’

She says if the rate is not reduced, we can expect at least another 280 food business closures over the next six months.