There's a call on government to consider the implications a higher VAT would have on the small and independently-owned hospitality businesses.

The Cabinet is due to meet on Tuesday to announce whether it will hike the tourism VAT rate to 13.5%.

That would be up from the current rate of 9%.

Fota Island Resort General Manager John O'Flynn says an extra tourism VAT rate isn't necessary and will only do further damage to an already struggling industry.

"The coffee shop that's out in the west of Ireland, the bar that's down in West Cork ... the impact that it will have on those businesses, the people that work there, the other industries that are supported by those industries, what will happen to them when we put an additional price increase?", he said.

"That's not needed at this time."

'Going bust'

70% of small and medium businesses in Ireland fear they might have to close in 2023 due to rising costs, research carried out by Wise Business found.

250 businesses were surveyed and just over two thirds believe there is a ‘possibility’ they will close, while only one-in-three think their business will be ‘fine’.

“[2022 was] tough for SMBs, and next year looks set to be similarly challenging,” Clara Nobre, Head of Wise Business, said.

“The rising costs of business are creating real pressure on many brilliant businesses’ bottom lines.”

In Budget 2023, the government announced a Temporary Business Energy Support Scheme to help with rising bills.

This is the last month businesses can avail of it, but only €26 million of the €1.2 billion allocated has been used due to low uptake.

Viability

The fear is that, as government supports disappear and taxes rise, small to medium sized businesses will not survive the year.

"The independently-owned bars, restaurants and coffee shops, they're a key part of our industry, a key part of the attraction that makes Ireland such an attractive place to visit for foreign tourists", Mr O'Flynn said.

"This extra cost on top of these businesses would question the viability of them, and if we don't have these businesses, we don't have a hospitality industry going forward."

Main image shows an open sign on a shop door of a small business.