THE VAT INCREASE IS KILLING OUR INDUSTRY!
The Government’s decision to increase the hospitality sector’s VAT rate by 50% from 9 to 13.5% last September is the primary cause of the hundreds of restaurants, cafés and other food-led businesses that have closed their doors since then. In addition to this, almost three-quarters of Restaurants Association of Ireland members expect to be forced to shut their doors for good if the lower rate is not returned. The 9% VAT rate MUST be reinstated for our low-margin, labour-intensive industry in Budget 2025.
WHAT’S AT STAKE?
The Cost of Restaurant Closures
The social impact that the loss of a local restaurant or café has on communities, particularly in regional and rural areas, is well understood. For the first time, a report published in April 2024 by leading economist Jim Power on behalf of the Restaurants Association of Ireland titled ‘The Economic Impact of Restaurant Closures’ laid out the stark reality of how damaging closures are to the State and the economy. The report found that the average closure of a restaurant leads to losses of up to €1.36 million and results in the loss of 22 direct jobs. Following the report, the question should no longer be ‘how can the Government afford to reinstate the 9% VAT rate’, but rather ‘how can it afford not to?’
Hospitality Sector United Around VAT9 on Food
It is very much worth noting that the entire hospitality industry – between on-the-ground operators and their representative bodies alike – is fully united in our pre-Budget request: the reinstatement of the 9% VAT rate on the food element of the hospitality sector. While the return of the 9% VAT rate on the entire tourism and hospitality sector would cost €750 million annually, the lower rate on the food element of the hospitality sector alone is much more affordable, costing in the region of €500 million. The Government cannot say it has not been warned that Budget 2025 will be assessed by the hospitality industry solely on its decision around VAT9 on food.
The Average Restaurant Faces €100,000 in Extra Costs This Year vs 2023
Reinstating the 9% VAT rate is the only measure that the Government can take to make business costs sustainable again for the hospitality sector and return long-term viability to our industry
Are you aware of a small business in your area that has closed this year?
Source: Amárach Research/Business Plus [May 2024]
Do you think the Government is doing enough to support small businesses struggling with increased costs?
Source: Amárach Research/Business Plus [May 2024]
Should the Government have retained the lower 9% VAT rate for restaurants and cafés?
Source: Red C/Business Post [January 2024]