The VAT increase for the hospitality sector has been described as “madness” by one restaurant owner.

In 2020, the Government slashed the VAT rates charged for tourism, hospitality and some other services to 9% to help the sector deal with the difficulties of the pandemic.

The cut was extended into 2023 to give the industry time to “rebuild and consolidate after a harrowing two years under COVID-19” but returned to 13.5% at midnight last night.

During the summer of 2022, many hotels began charging extremely high prices and then-Minister for Finance Paschal Donohoe said they had “undermined the competitiveness of our country” and would be ‘taken into account’ during the budget.

The Restaurant Association of Ireland has warned the VAT increase could lead to thousands of job losses in the sector and Aisling Kelly, who owns Sligo Oyster Experience, said she could not understand the logic behind the move.

“I think it’s madness, to be honest,” she said.

“Because even the Government will see my Revenue returns, how businesses are doing, and they’re blaming a few hotels that are doing well and basing it on the rest of the country.

“It’s just wrong.”

In the second quarter of 2023, the number of overseas visitors to Ireland dropped by 37% in comparison to pre-pandemic figures.

One potential reason is that many hotel beds are being used by Ukrainains and Lorna Feeney, who owns Austies Pub & Restaurant in Rosses Point in Sligo, said it has been a difficult few months.

“It’s been a tough and challenging summer season for a number of reasons,” she said

“A big challenge for us this season is the lack of bed nights; our local hotel, we’ve lost that bed supply.

“So, there hasn’t been somewhere to stay within the village - other than the caravan park.

“So, that has really hit our night trade.”

Before the pandemic, tourism was worth an estimated €5.6 billion to the Irish economy and generated €1.8 billion in revenue for the Government.

Main image: Diners eating lunch.