Hospitality sector heading into real trouble because of ‘tsunami of costs’, says Cork hotelier 

THE reinstatement of the 9% Vat rate is “critical” for the viability of the food and hospitality sector, the Cork-based president of the Irish Hotels Federation has said.

Michael Magner said the sector is currently heading into real trouble because of a “tsunami of costs”.

Mr Magner’s comments came in response to a pledge of “a substantial income tax package” in next year’s budget, from Fianna Fáil Finance Minister Michael McGrath.

During a wide-ranging speech made at the Fianna Fáil ard fheis in Dublin on Saturday, Cork South Central TD Mr McGrath made no reference to the campaign by restaurant, hotel, and vintner representative bodies to restore the Vat rate of 13% for the accommodation, leisure, and hospitality sector back to 9%.

Closures

According to Mr Magner, owner of the Vienna Woods Hotel in Glanmire, there is real concern for the food sector as many businesses are being overwhelmed by the growing expense of staying open.

Since the beginning of the year, a number of leading Cork restaurants have closed, citing the growing cost of doing business among the reasons for their decisions.

Mr Magner described the former Vat rate of 9% as being the “correct rate” for the sector and said what he described as “a tsunami of costs” meant reform of PRSI for employers was not enough.

“There is evidence that food-related business is heading towards real trouble,” he said.

“It is imperative that targeted supports protect these jobs and the future of the sector,” said Mr Magner, who pointed out that the 270,000 workers employed in the tourism sector represent 13% of the Irish workforce.

“The industry welcomes the commitment from the minister and Government to reforming employers’ PRSI, and meaningful reform must be introduced now and not later.

“The reinstatement of the 9% Vat rate for food and food-led business is critical for the viability and the sustainability of these businesses.”

Mr Magner said the tourism industry made a tremendous contribution to the Irish economy each year and said it was important to have “a viable and sustainable tourism product to meet the demand from tourists”.

Measures to support sector 

In his speech at the Dublin Royal Convention Centre, Finance Minister and Cork South Central TD Michael McGrath outlined a number of measures the Government was taking to support the business sector.

“We all recognise the impact rising costs are having on small businesses throughout the country,” said Mr McGrath.

“This is why I reduced to 0% the interest charged on warehoused tax debt.

“We also allocated over a quarter of a billion euro to the increased cost of business support grant — a grant that businesses can now apply for.

“We have also committed to reforming employers’ PRSI, which is a direct cost on businesses employing staff.

“We are increasing the energy efficiency grant for businesses, and embedding an SME test in all policy decisions across Government.”

The minister also pointed to “the first cut in the universal social charge in five years”, the increase in tax credits, and the lifting of the entry point to the higher rate of tax, as measures taken by the Government to support families.