Cork restaurateur: ‘Closures are going to come’ if Vat increase goes ahead

Businesses on the edge cannot afford to absorb further increases, says Cork restaurateur Mike Ryan after a report that suggests one in five restaurants will be at risk of closure if the reduced Vat rate is increased.

Representatives of the hospitality industry met with the Minister for Finance Michael McGrath on Monday evening in order to restate their demand for the retention of the Vat rate.

While the meeting was described as a "listening exercise", the Department of Finance is said to be keen to end the tax break.

Mr Ryan, who is the Cork chair of the Restaurant Association of Ireland said that: “Essentially, the Vat goes up and restaurants either have to up their prices or absorb the costs.

“At the minute, no one can afford to absorb any more increases, so menu prices will go up. You are talking about businesses that are already on the edge. The Government have it in their power not to put extra pressure on.

“The members of the public are already being squeezed, if they see menu prices going up it will decrease the number of people going out.

“It’s just another tax that you are collecting for the Government at source and passing on.”

“The problem is: The higher rates go onto your menu, and people can’t afford to pay it, so they stop going out to eat. That is when the closures are going to come. 

Restaurants are already under huge financial pressure and by being forced to raise their prices, it will be the lack of custom that will put them out of business,” said Mr Ryan, the chef and owner of Coqbull and Cornstore.

The report, commissioned by the Restaurants Association of Ireland and written by associate professor emeritus of economics, Dublin City University Business School, Tony Foley, concludes there is a strong economic case for arguing that now is not the time to increase the Vat rate from 9% to 13.5%.

The higher rate is due to return in the beginning of March, however, the Restaurants Association of Ireland has recommended that the reduced Vat rate remain in place until the end of 2025.

The report warns that the current rate of Vat should remain in place post-pandemic due to inflation, which has been fuelled by the war in Ukraine.

“The Government needs to re-evaluate their plan to raise the Vat rate for the hospitality sector by 50% as this hike comes in conjunction with various constraints such as the end of the Temporary Business Energy Support Scheme,” said Adrian Cummins, chief executive of the Restaurants Association of Ireland.

“Thus, leaving restaurant owners, many of whom identify as SMEs, to battle pressures on margin and by our estimate putting one in five restaurants at risk of closure due to a Vat increase.”

The representative body for restaurants, cafes, and gastropubs in Ireland wishes to ensure the restaurant and pub sector “can continue to recover from the Covid-19 pandemic while simultaneously weathering rising input costs due to inflation”.

In a separate report, economist Jim Power has stated that the proposed rise in hospitality Vat could result in over 24,000 job losses.

Speaking on this, Mr Ryan told The Echo: “The Vat on food alone brings in around €260m to the exchequer, but what would it cost when a restaurant that employs 30 people directly and more indirectly has to close its doors?

“Is it more beneficial to get that €260m to the exchequer or to cost it probably double and triple that with benefits and unemployment that will come down the tracks because of this? 

"It’s not worth that short-term gain because of the long-term repercussions it would cause.”