'Outlets are under savage pressure': Renewed call for Vat rate cuts in Budget 2025 from Cork hospitality reps

Representatives of the Irish hospitality sector have issued an open letter to government leaders ahead of Budget 2025, calling for an “urgent” re-instatement of the 9% Vat rate.

The letter details how the sector is facing a challenging operating environment, due to rising costs, falling food sales, and tight margins.

Speaking to The Echo, Cork’s Micheal Magner, president of the Irish Hotels Federation (IHF) and owner of Cork’s Vienna Woods Hotel, said that the aim of the letter is to highlight the challenges faced by those in the hospitality industry, as the sector supports up to 280,000 employees nationwide, with 70% of those jobs located outside of Dublin.

“If the government don’t take the right steps and use Budget ’25 as an opportunity to address those challenges, there will be more closures, more job losses, and it won’t be viable for businesses to operate in this country,” said Mr Magner.

“Our engagement with the government has been around the Vat rate because we’ve identified that as a key and immediate measure.

“While there were cost of living and business supports introduced during the lifetime of the current budget, unfortunately, those business supports did not go far enough.

“By reducing the Vat rate back to 9%, that will help to put the industry on a more sustainable footing and it would be very disappointing to see the government not taking that proactive step,” he added.

“Hospitality outlets are under savage pressure and that’s really the crux of it.

“Really, what we’re saying to the government is; please act now. We need to have the correct framework in place to protect the indigenous industries in Ireland,” he said.

President-elect of the Vintners Federation of Ireland (VFI), Michael O’Donovan, who is the owner of Cork’s Castle Inn, said that while the reinstatement of the 9% Vat rate is important, there are a number of other issues affecting publicans that need to be addressed.

“Vat at 9% is one thing that’s very important to our members, but the Vat at 23% [on alcohol] is very important as well, because only those that do food, the 9% is applicable to, so a reduction on the 23% back to 21%, would be a huge help,” said Mr O’Donovan.

“We’re seeing and hearing from our members that margins are very tight, so if things get increased, businesses are in deep trouble.

“I think it’s a real threat that businesses won’t survive in the current climate.

“Employer PRSI would be another huge one, it feels like a double taxation at the moment — when staff are going out sick, you have to replace them, it’s not an office job where work can wait until a person comes in a few days later, so you’re paying two wages at that time [and] it’s very expensive for a business.”

Mr O’Donovan also highlighted how inheritance tax on children taking over existing businesses from ageing parents is a “huge burden” for members of the VFI.

“If a business is open, thriving and workable, the inheritance tax on that business can be very punitive,” he said. “We’ll be asking the Government to look at that [too], if they want to keep businesses open.”