A “huge number” of restaurants and cafes have closed since the Government hiked VAT on hospitality, the Restaurants’ Association of Ireland has claimed. 

During the pandemic, the VAT rate was reduced from 13.5% to 9% as restrictions saw the economy contract.

Last year, the rate returned to its original rate but the Restaurants’ Association of Ireland estimated this has contributed to the closure of over 500 restaurants and cafes since then.

The group has launched a ‘VAT9’ in a bid to persuade the Government to return the rate to 9%.

“We’ve had VAT at 9% for 10 of the last 12 years,” President Paul Lenehan told Newstalk Breakfast.

“So, it was very much built into how we operated our businesses and it was the right rate of VAT on food.

“Businesses established themselves over that period of time, got used to paying it and when the VAT went back up to 13.5%, that was an extra 4.5% on a margin.”

The Blue Door restaurant in Limerick. Picture by: Alamy.com

Mr Lenehan said the economy in Ireland has suffered a number of shocks in recent years and the result is businesses are suffering.

“We already increased our prices to reflect the energy costs, wage inflation and food costs… around the time of the Ukrainian War,” he said.

“Coming out of COVID when we’d been having a very lean period for a number of years when we had VAT at 9%.

“When it was put back to 13.5% in the last budget, nobody foresaw all the other costs that were rising.”

Mr Lenehan said during summer most restaurants workers were “busy fools” because no matter how hard they work, it is difficult to turn a profit.

“There’s no margin,” he said.

“Our margin has been completely eroded with all the other costs associated with doing business.

“VAT is the only one the Government controls - they can’t control food costs, they can’t control energy costs and can’t control wage inflation.”

Budget 2025 is to be held on October 1st.

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Main image: Young waiter with drinks. Picture by: Alamy.com