The failure to extend the 9% VAT rate for the hospitality sector is “disastrous” for Ireland’s pubs and restaurants.

In his Budget 2022 speech, the Finance Minister Paschal Donohoe confirmed that the 9% rate will increase to 13.5% next September.

The increase was originally announced last year; however, the industry had called for it to be delayed due to allow businesses get back on their feet after the pandemic.

On Lunchtime Live this morning Restaurants Association of Ireland (RAI) Chief Executive Adrian Cummins said the decision is a “bolt out of the blue” for the industry.

He said businesses are being asked to swallow a 50% VAT increase while they are already facing increased business costs, a skills shortage and tax bills that were deferred under Revenue’s ‘warehousing’ scheme.

On top of that, he noted that COVID wage supports are due to end by next March.

“This is going to be a very tricky year next year,” he said. “We are describing it as disastrous this announcement around the VAT increase.”

Pandemic

He noted that business have only had two and a half months of trading since indoor dining reopened at the end of July.

“We are trying to get our industry back up off its knees; to get us back into a position where we are viable and these businesses now, from next March onwards, will have to stand on their own two feet and then face into a 50% VAT raise that has to go to Revenue,” he said.

“I think it is going to be a very tricky position for our industry next year. We do welcome the supports for tourism - getting international travel coming in and all of that - but the mood for our industry is very sombre at the moment when they to look into what is in the future for them over the next 12 months.”

VAT

Mr Cummins noted that the increase puts Ireland “totally out of kilter” with the rest of Europe on hospitality VAT, with most countries utilising the 9% rate and others such as Germany, as low as 7%.

He said the timing of the change, which is due to come in one month before next year’s budget is “very sneaky.”

“I thought it was a very sneaky move by the Government because it will come in on September 1st, the Budget will be in October and they will probably turn around to us and say, it is in already, there’s nothing we can do about it,” he said.

He called on hospitality businesses right around the country to use the time between now and September to lobby for the rate to remain at 9%.

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