I read a headline on an article in The Irish Times recently: “If a 9% VAT rate is so important to viability of hospitality sector, why wait until next January to introduce it?” As the co-owner of an independent bakery and cafe in Kenmare, Co Kerry, I’m all too aware that more than 600 food businesses closed last year after the VAT rate was increased to 13.5 per cent in autumn 2023. Are we now going to watch another 600 businesses close in 2025, as the Government drags its feet on this issue?
I am not being dramatic in saying how this delay will impact small food businesses. For us, the initial reduction back to 9 per cent was a lifeline, not because we would have more money in our pockets, but because the auto-enrolment pension scheme begins on September 30th, 2025. This will mean, as employers, we will be matching the pension contributions that our employees will be making. This is added to the increase in the minimum wage that happened this January, meaning the cost of staffing our business has increased in a way that is becoming increasingly unsustainable. Essentially, the breathing room that the 9 per cent VAT gave meant these increased staff costs could be absorbed.
It may have fallen away from the main headlines, but everyone, not just small business owners, still feels the impact of inflation. Inflation may have stabilised, but prices are still creeping up all the time. The only cost that decreased for us in 2024 was when we renegotiated our energy prices, down from the peak they were at during the first years of the war in Ukraine. Just these last two weeks, our regular 2.5-litre bottle of milk was increased by 22 cent, our other dairy supplier has put up the cost of cheeses, and I was warned yesterday by a rep that the cost of chicken breasts will go up with bird flu on the rise, which I’m assuming will also affect egg prices in the near future. This is on the back of news that the coffee harvest was bad in 2024, so bean prices are also going up.
It was our hope that, even with these increases and the pension levy, the return of the VAT rate to 9 per cent would allow us to keep our prices steady in the cafe. We have a strong local trade that we hugely value, and we have done all we can to absorb price increases. The public needs to be aware the price increases in cafes are not so that the cafe owner makes more money but that the cafe stays in roughly the same financial condition in which it started. However, in an industry where 8 per cent net profit is considered standout (most cafes are averaging 2-3 per cent net profit), it leaves many owners no choice but to either close up shop or put up prices to cover these increasing financial pressures.
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One Opposition TD, since the forming of the new Government, proposed adding two more public or bank holidays to the year. How removed from reality are these people? I imagine they don’t have any realisation of how a public holiday impacts different industries. When I worked in an office environment, you got no extra day’s salary; rather the office was closed for the day, and you were expected to make up whatever work was missed on the day it was closed, making zero impact to wage costs for the business.
[ Pending 9% VAT rate for food and catering sectors to cost €675mOpens in new window ]
As I understand it, in cafes and restaurants, and I can only assume retail, any employee who has worked “40 hours in the previous five weeks” before a public holiday is entitled to either double pay if they are working, or an extra day’s pay, if not. Last summer, in the peak tourist season, we had a staff of 22. Paying 22 staff an extra day’s pay amounts to somewhere between €2,500 and €3,000. It essentially means, despite the public seeing our busy premises and thinking the cafe is making “a killing”, our goal on a bank holiday weekend, as cafe owners, is to make enough sales, not so we make extra profit, but simply to cover this bill. In summer we do; in winter we don’t.
The reason this TD proposed extra holidays was because other countries in the EU have two more holidays than us. With that logic, why don’t we take on France’s higher tax rate, or Italy’s average industrial wage, which is far lower than our own? I’m not sure we should be looking to these EU economies with near-stagnant growth for inspiration.
This is the reality: my salary in 2024 as joint owner/manager of a business that employed up to 22 staff was two-thirds the amount I was paid in my previous PAYE job, where I was a sales representative with no staff reporting to me. Given the responsibility and stress of paying this volume of wages in an environment that was growing ever more financially hostile, my husband and I decided the only path forward for our sanity was not to grow our business any more, but to consolidate. We sold our second premises and now have a staff of 12. You can thank the Government for that, for increasing costs on business directly with their policies, which are anti-entrepreneurship, while also refusing to challenge any big suppliers on their pricing.
To this day, we have no idea – not just as business owners but as consumers – if the inflation that has been put upon us is due to real-world financial costs or if it’s simply a case of price gouging. Other countries have completed studies, and it has been abundantly clear that much of inflation has been due to a cash grab by big business. If our farmers and small producers have never been paid less by the middleman, to a point where they need grants and subsidies to avoid bankruptcy, then how on Earth are the prices for consumers at the other end higher than they’ve ever been?
When the 9 per cent VAT kicks in, the Government will be essentially a year into governance; 20 per cent of their term will have been used up. Because of the delay, 2025 is going to be the hardest year yet for food SMEs in this cost-of-living crisis. In among all this there has been scandal after scandal of the Government wasting our money, notably the OPW, and that fills me with fury when I pay the colossal PAYE and VAT bills for our business and its employees each month. It’s insulting to every taxpayer. What has been more important to our elected representatives this new year is their egos, wasting time and butting heads in the Dáil, squabbling like children over speaking time, when they should be implementing policies the country is screaming out for.
This Government would want to wake up. They have two options before them: to start listening to regular Irish people and make tangible change, or pray to God that somebody doesn’t appear with even an a semblance of competence or – worse still – no competence but just charisma, because they will be wiped out in the next election otherwise.
Jamie O’Connell is a writer who, with his husband, John Hallissey, owns Bean & Batch in Kenmare, Co Kerry @beanandbatchkenmare on Instagram
