Raising Vat rate in Budget ‘could damage competitiveness of hospitality’

CORK hotel, bar, and restaurant managers have spoken out about the severe consequences that will follow an increase of the Vat rate on hospitality to 13.5% in Budget 2023.

Owner of the Cornstore and Coqbull Restaurants Mike Ryan said a Vat increase could force businesses to shut their doors.

“At a time when businesses are being hit by so many price increases which are directly impacting the actual viability of the businesses, it’s impossible to try and absorb any Vat increases which historically businesses would have tried to do incrementally over a period of time to soften the effects of the increase,” he said, adding that the additional cost would be passed on to the customer.

“At present any increases will unfortunately have to be passed on directly to the customer which will have its own effects on a business especially when the general public’s discretionary income is being squeezed from all angles.

“A Vat increase on hospitality only makes Ireland less competitive for international tourists and hits a sector that is still recovering from a two-year Covid closure.

“Retaining Vat makes the sector competitive, secures jobs, and ensures sustainability of sector into the future.”

Vintners Federation of Ireland (VFI) chairman Michael O’Donovan said the VFI has been campaigning for the retention of the 9%.

“We have had meetings with government officials and ministers Michal McGrath and Paschal Donohoe,” he said. “They haven’t indicated what they will do yet. They have listened, and we have told them of the implications.

“The Vat rate is to change in February 2023. We are heading into a difficult winter. We need to be competitive next summer. The 9% Vat rate has us at a mid-range of competitiveness, 13.5% will put us in the highest bracket.

“There would be a huge knock-on effect, inevitably. If it goes up, prices will go up — and we don’t want that.”

Mr O’Donovan added: “Professor Tony Fallon has said that increasing the Vat rate will add half a percent to inflation and if prices go up. In tourism, we want to be in competition with Europe.

“It’s difficult for us. The price of everything is going up, chicken, beef, energy costs are rising, it has not come at a good time.”

Clayton Hotel general manager Conor O’Toole said there are many reasons why the 9% Vat rate should be maintained.

He said the 9% rate was influencing competitiveness, inflation, employment, value for money, viability, and the recovery of the tourism sector.

“Any change to Ireland’s Vat rate would damage our competitiveness at a critical time for the industry as macroeconomic conditions worsen,” he said.

The hotel manager also said that the full recovery of Irish tourism to pre-pandemic levels will not be achieved until 2026 — and that any increase in the Vat rate would damage competitiveness, depress demand, and stall recovery.