Hundreds of hospitality businesses close due to the VAT rate increasing
The Minister for Finance is been urged to prioritize a significant VAT rate reduction
Nearly 600 hospitality businesses have closed their doors in the last year due to the increase of the VAT rate, according to Mattie McGrath TD.
Mattie McGrath, Leader of the Rural Independent TDs, has once again urged the Minister for Finance to prioritize a significant VAT rate reduction for the Tourism Hospitality Sector.
He proposes a decrease from the current 13.5% to 9%, and an even lower 5% for all Rural Tourism and Hospitality Providers.
McGrath criticizes last year’s government decision to increase the VAT rate, describing it as misguided.
He points to the tangible repercussions across the country, with nearly 600 hospitality businesses closing their doors in the past year alone according to data compiled by the Restaurants Association of Ireland, which according to McGrath underscores the urgent need for VAT reduction.
McGrath stated: “The 9% VAT rate, which bolstered the hospitality and tourism sector from 2011-2018 and again from 2020-2023, must be reinstated in the upcoming Budget. This immediate restoration, effective from Budget night, is crucial to support food-related businesses that are currently facing a significant rise in insolvencies. This increase in business failures is largely due to heightened costs, many of which stem from new government regulations and policies. However, in September 2023, the government abruptly increased this rate to 13.5%, a move that has had far-reaching implications for the sector.”
“In June, my colleagues and I from the Rural Independent Group championed a pivotal Dail Motion. We urged the government to reduce the VAT rate for the Tourism Hospitality Sector to 9% and to 5% for all Rural Tourism and Hospitality Providers, aligning with EU guidelines. Despite the motion’s approval, the government’s response has been conspicuously absent, even as we witness an alarming uptick in closures - over 80 more restaurants, cafes, and other food-led businesses in just the past two months.”
“It’s disconcerting to observe the government’s focus on rescuing senior RTE executives, while seemingly neglecting the plight of cafes, restaurants, rural pubs, and the wider tourism and hospitality sector. These SMEs, the backbone of our economy, are in decline, and its high time the government addressed this issue.”
“The proposed VAT rate reduction would not only provide a lifeline to struggling tourism and hospitality businesses but also lower consumer prices, stimulate demand, and boost employment in the sector. As VAT is a regressive tax, it disproportionately impacts lower-income households, particularly when it comes to discretionary spending like dining out or ordering a takeaway.”
“I am advocating for the reduced VAT rates to be applied across the entire hospitality sector. This includes a diverse range of businesses such as hotels, bars, pubs, canteens, hairdressers, barbers, catering operators, hostels, bed and breakfasts, caravan parks, self-catering accommodations, and guest houses.”
“The significant contribution of the hospitality and tourism sector to the State’s finances is being overlooked by this government, despite its substantial impact on employment and indirect contributions through income tax and VAT. Ireland, excluding Denmark, has the highest VAT rate for the tourism and hospitality sector in Europe at 13.5%.”
“The upcoming Budget should not only announce the reduced rates but also permanently establish the VAT rate at 9% and 5% from Budget night. This would provide the sector with much-needed stability for five years in the context of Budget 2025.”
“In the context of Budget 2025, we are also advocating for varying VAT rates across the country in the hospitality and tourism sector to promote regional balance. This includes introducing a reduced 5% VAT rate for areas outside Dublin, thereby creating a distinction between the VAT applied in rural areas and the capital and ensuring that rural areas are subject to a VAT rate no greater than 5%.”