Representatives of the hospitality, tourism and retail sectors protested outside Government Buildings in Dublin yesterday over what they see as failure on the part of the Government to address unsustainable cost pressures on their businesses.
The protest came as another well-known Dublin restaurant, Dillinger’s in Ranelagh, announced it is to close. It is two months since Dylan McGrath shuttered two of his restaurants, Brasserie Sixty6 and Rustic Stone, saying they were “simply not sustainable”.
The Restaurants’ Association of Ireland, one of the bodies that organised yesterday’s protest, lobbied very hard for a reinstatement of the reduced rate of VAT for hospitality businesses in the budget. Introduced as temporary measure in the wake of the Covid pandemic, the 9 per cent rate was put back up to 13.5 per cent last August.
A second reduction in the rate was trenchantly opposed by officials in the Department of Finance and the Department of Public Expenditure and Reform. Tax strategy papers released before the budget argued that the cost was very significant at €764 million a year “which the evidence available at present does not support”
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The officials also argued that an easing in inflation should boost household disposable income which in turn would feed through into more spending in hospitality businesses. Employment in the sector is back above pre-pandemic levels and Irish VAT rates for hospitality are not out of line with European norms, they pointed out. The Government was clearly persuaded by their arguments and left the rate unchanged.
They must now face the political consequences as an election looms. Tánaiste Micheál Martin acknowledged yesterday that the rapid rise of the minimum wage over the last two years has been a factor for retail and hospitality.
He also conceded there were issues to work on in terms of regulation and cost that have been identified by business lobby groups. He made no mention of a rethink on the VAT rate. It may well stay but small businesses do need support.
