Evening out or daily cup of coffee to increase as VAT goes up to 13.5%

Evening out or daily cup of coffee to increase as VAT goes up to 13.5%

"Just as sterling collapses, to put up prices in the hospitality industry, isn’t a good idea,” Richard Jacob of Idaho Cafe on Caroline Street. Picture: Jim Coughlan.

CUSTOMERS can expect the cost of everything from their morning coffee to an evening out to rise as the impact of the VAT increase on the hospitality industry kicks in.

As business owners raise their prices they are keen to emphasise that they are not to blame.

“It is just another tax, if VAT increased on cars, car prices would go up,” Richard Jacob of Idaho Café said.

“Hopefully people will understand that it is not us, it is the Government.”

From 2011 to 2018 services connected to the hospitality and tourism sectors paid a reduced rate of VAT, at 9% rather than 13.5%.

But that reduction was dispensed with in the last budget and the higher rate has applied since January 1.

Cork restaurant owner Liam Edwards, president of the Restaurants Association of Ireland, says this has forced the hand of businesses who did not want to raise prices.

“This is not a profit-making measure, this is the direct cost of the VAT going up,” he said. “It is a consumer tax, it is the consumer who is suffering.”

He believes the VAT rate change will have a negative impact on the food industry in Cork and around the country.

“The saving grace in the restaurant industry was the VAT remaining at 9%, it was keeping people in business and giving others the opportunity to open new restaurants,” he said.

“We have seen some great restaurants open in Cork, would they have been able to with 13.5%, will we see new ones?

“Time will tell, but I don’t think there will and there will be closures.”

Mr Edwards pointed out that other costs of doing business, notably insurance, are also rising.

“We have been absorbing the costs because for a lot of businesses there is a fear factor in putting up our prices,” he said.

“Every time a customer walks in you are trying to give them value for money, but you are trying to remain in business too. We didn’t want to do this, this decision was taken out of our hands.”

Mr Jacob believes the increase is coming at a time with the tourist industry is already facing troubled times. “On a large scale, just as sterling collapses, to put up prices in the hospitality industry, isn’t a good idea,” he said.

“On a small scale for us it shouldn’t discourage people just coming out for lunch. But for someone coming to stay for 10 days in Ireland, and suddenly it is now 10% more expensive, that would be my concern, the whole tourist market. It is not great timing.

“I think if it could have been done in a staggered way, even over 18 months or so, that would make more sense. An overnight jump is far more noticeable.”

Mr Edwards said the RAI will continue to lobby for the Government to address the costs of doing business.

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