Yesterday, the representatives from the retail, tourism, and hospitality industries gathered outside the Government Buildings in Dublin to voice their displeasure over the perceived nonchalance of the government towards the escalating cost pressures that their businesses are currently grappling with.
This protest followed the news of the impending closure of a prominent Dublin restaurant, Dillinger’s in Ranelagh, mere months after renowned chef Dylan McGrath had to shut down two of his own establishments, Brasserie Sixty6 and Rustic Stone, citing their financial unviability as the reason behind his decision.
The Restaurants’ Association of Ireland, one of the key entities to organise this protest, had fervently advocated for a reconsideration of the reduced VAT rate for hospitality businesses in the impending budget. Originally implemented as a short-term relief amid the Covid pandemic, the reduced rate of 9 per cent was revised back up to 13.5 per cent last August.
However, a fresh reduction in the VAT rate was met with considerable opposition from officials within the Department of Finance and the Department of Public Expenditure and Reform. Pre-budget tax strategy documents suggested a significant annual cost of €764 million associated with this reduction. The documents stated that the prevailing evidence does not corroborate this substantial expenditure.
The same officials rationalised their stance by claiming that an inflation decrease would likely result in increased household disposable income, thus promoting higher expenditure in the hospitality sector. They also highlighted that the employment levels in this industry have exceeded pre-pandemic figures and that the Irish VAT rates for hospitality are in accordance with the European average. Consequently, the government chose to maintain the VAT rate, a decision that might have political ramifications with an election on the horizon.
Tanaiste Micheál Martin, recognised yesterday that the spike in the minimum wage over the past two years has had an impact on the retail and hospitality sectors. He agreed that measures were needed to address cost and regulatory issues raised by business lobbying organisations. However, he did not discuss a potential review of the VAT rate, indicating that even though these businesses may need support, it might remain the same.