One in five restaurants at risk of closure, says RAI
One in five restaurants are at risk of closure, according to Restaurants Association of Ireland (RAI), should the VAT rate increase to 13.5%.
The RAI has published an economic report advocating for the government to extend the reduced 9% VAT rate until the end of 2025, to ensure the restaurant and pub sector can continue to recover from the Covid-19 pandemic while simultaneously weathering rising input costs due to inflation. Commissioned by the RAI and conducted by Tony Foley, Associate Professor Emeritus of Economics, Dublin City University Business School the report states, “There is a strong economic case for arguing that now is not the time to increase the VAT rate from 9% to 13.5%.”
Findings from the report include that the 9% VAT rate will keep Ireland competitive compared with other economies.
The report also says that Covid decimated the restaurant sector and unfortunately recovery from Covid has been hit by the inflation and energy crisis. Increasing the VAT rate will add to inflationary pressure at a time of already very high inflation.
It also finds that the public finances can afford the cost of the 9% VAT rate. “While there is always growing demand for reduced taxes and increased expenditure from the citizenry, the current strength of the public finances indicates that the lower VAT rate is affordable despite Covid and cost of living supports and despite a current high public debt.”
According to Adrian Cummins, CEO of the Restaurants Association of Ireland,
“The government needs to re-evaluate their plan to raise the VAT rate for the hospitality sector by 50% as this hike comes in conjunction with various constraints such as the end of the Temporary Business Energy Support Scheme (TBESS). Thus, leaving restaurant owners, many of whom identify as SME’s, to battle pressures on margin and by our estimate putting 1 – 5 restaurants at risk of closure due to a VAT increase.”