Government driven price rises will be on the menu for pubs and restaurants from tomorrow with the increased rate of hospitality VAT set to kick in, the Licensed Vintners Association (LVA) has warned.
The LVA and other hospitality groups had been seeking a continuation of the current 9% VAT rate that applies on food but the government made the decision to increase the VAT rate to 13.5% – a 50% rise in the level of VAT.
The LVA believes that this rise is coming at a time when there is already an extraordinarily high rate of inflation on ingredient purchases and the cost of food preparation in what is a labour intensive, low margin business. They also believe that the jump in taxation will add to inflation in the economy at a time when the public are facing expensive “back to school” costs, higher mortgage interest rates and high energy costs as we enter the autumn.
“We are very disappointed that the government has decided to add to inflation with this unnecessary increase in taxation on food,” said Donall O’Keeffe, chief executive of the LVA. “The 9% VAT rate on food purchased in hospitality settings was at the right level, both from the point of view of domestic consumers and attracting tourism.
“By moving ahead with the VAT rise, we will effectively see menus changed across the country so the Government can collect additional taxation from the public – heaping further pressure on already hard-pressed consumers.
“With the Exchequer in such a strong position, there was no reason why 9% VAT on food couldn’t have been maintained. Research conducted by Red C earlier this summer showed that 6 out of 10 members of the public wanted the 9% VAT rate to continue, so this move clearly doesn’t have public support.
“Where this will be most keenly felt is in the discretionary activity like enjoying lunch or dinner in local pubs, cafes and restaurants. When the pinch in business is felt in hospitality around the country over the months ahead, they will know this was specifically applied by the government,” O’Keeffe concluded.
Restaurants Association of Ireland
Meanwhile, the Restaurants Association of Ireland has described the move by the government to increase the 9% vat rate to 13% as of midnight tonight as ‘nonsensical’ and will close the doors on many low margin restaurants, cafes and food led pubs across the state.
The move will add to consumer inflation at a time when government announced it wouldn’t add to the cost of living, it will move Ireland to the second highest hospitality vat rate within the EU and it will erode Irelands competitiveness as a tourist destination.
The Chief Executive Restaurants Association of Ireland of the Restaurants Association of Ireland said: “The increase is wrong at a time when the country needs to reduce inflation, a vat increase only adds to inflation. Government need to restore the 9% Vat for Food related Hospitality businesses in Budget 2024 and we will me making the case for this when we meet with the Minister for Finance next week. The increase the vat rate is the final nail in the coffin for many small cafes, restaurants and food led pubs.”