In reference to your article titled, “Nearly 1,600 redundancies in the restaurant industry attributed to Government actions” (Business, 21st March), I wish to highlight the challenges that are currently being faced, with 20 years of experience operating a day-time café.
The reel of challenges, including the pandemic, increasing energy costs, soaring structural inflation, a significant VAT hike, constant wage augmentations, and looming Covid tax warehousing bills due in May, leave one perplexed about the monitoring of the hospitality sector.
Lodgings, B&Bs, restaurants, daytime cafés, delivery joints, and hairdressing salons make up the sector responsible for VAT collection. However, applying the single VAT rate of 13.5 per cent across these services appears to be a simplistic approach for revenue collection.
I base my argument on the existence of two pricing tactics in the sector. The first comprises services such as accommodations, which raise the price when demands increase, and the second consists of those with fixed costs. It’s hard to imagine paying more at your local café during weekends.
The usual net profit at a café fluctuates between 5 per cent to 10 per cent. Therefore, if the annual sales reach €500,000, the net income is limited to €25,000 at 5 per cent, which is less than the minimum wage when considered on an hourly basis. It’s always prudent to ensure that you’re not just working for the benefit of your customers, suppliers, and staff alone.
The sector’s associations have failed in underlining the necessity of introducing a two-tier VAT system, charging 13.5 per cent for accommodation services and 9 per cent for food, owing to the involvement of larger entities. Moreover, a surge in the Covid tax warehouse and subsequent employee costs are impending, resulting in business shutdowns and subsequent inflation. Does anyone consider the smaller players in the sector in this wider perspective?
Yours sincerely,
DEREK BENNETT
Proprietor of Harry’s Cafe Bar, Dún Laoghaire, Co Dublin.