A CORK restaurateur has warned that increasing the VAT rate paid by the hospitality industry will lead to job losses.
Since 2011, services connected to the hospitality and tourism sectors have paid 9% VAT, reduced from the previous 13.5%. As Ireland’s economy recovers from the crash, there have been calls for the special rate to be scrapped. Last week, Minister for Finance and Public Expenditure Paschal Donohoe said a rate increase was under consideration.
In its pre-budget submission, the Irish Congress of Trade Unions said the reduced rate was effectively ‘subsidising wealthy companies’ and was costing the Irish taxpayers millions every year.
But Liam Edwards, of Jim Edwards Bar and Restaurant in Kinsale, said support is needed for an industry that still faces significant challenges.
“Since the 9% was introduced, everything else has gone up. There have been insurance hikes, rates hikes, wages have gone up. We have seen the cost of food produce go through the roof, we’ve recently had to take a 20% increase in the cost of dairy products.
“As restaurateurs we feel we are absorbing a lot of these prices, because we are conscious we need to offer value for money. The one thing that has stayed the same is the 9% VAT so it could be the straw that breaks the camel’s back for a lot of restaurants. Everything else is rising and I feel it will tip businesses over the edge.” The ICTU pointed to the fact that hotel room occupancy rates are up, saying: “Dublin rates are among the highest in Europe, with revenue per available room up 16% year on year.” But Mr Edwards, who is the current president of the Restaurants Association of Ireland (RAI), said his members should not be considered in the same light as Dublin hotels.
“There is a two or three tier recovery in Ireland. There is no doubt Dublin is booming, and to a lesser extent Cork, Galway and the major tourist hotspots. American tourists are coming in massive numbers but on the flip side of that, numbers of British tourists are way down. In our area here, I’d say British tourism is down 25%.
“A lot of restaurants in rural Ireland haven’t seen the effects of the recovery yet.” The loss of British tourists is particularly evident during the winter months.
“What we have witnessed in Kinsale and it is happening in other areas is that the off-season is much quieter. The English tourists who come for short weekend vacations, they have stopped straightaway.
“Another thing we notice is the consumer spend is down. While restaurants are busy and there are a lot of people in them, sales have dropped. In my own business, I have seen the Irish coffee trade decimated. People are having their meal and maybe one drink.” The ICTU highlighted Department of Finance figures which estimated that the cost of the reduction to the Exchequer between 2011 and 2016 was €2.2 billion. They said: “The needs of citizens should be prioritised over a subsidy to profitable business owners.” But Mr Edwards said job losses have to factored into any conversation about the money raised.
“Increasing the VAT will cost job losses. The talk is the extra money raised by raising the VAT but if it costs jobs and puts people back on the live register, it will cancel it out.
“We don’t see the sense in that.” The RAI have the support of Ireland South MEP and member of the EU Tourism Taskforce Deirdre Clune. She wrote to Minister Donohoe last week urging him not to increase the rate, saying: “From speaking to local restaurant and hotel businesses in Cork and over the south of Ireland, I can assure you that a large number of these facilities depend on this rate for their livelihood.”