A Regional Independents’ Motion to cut the VAT rate for food-led hospitality businesses was voted down in the Dail on Wednesday night, with the result described as “disappointing” by the Restaurants Association of Ireland (RAI).
The Private Members’ Business Costs for Micro, Small and Medium Enterprises Motion
sought to reduce the current VAT rate of 13.5 per cent to 9 per cent for food businesses in the hospitality sector before Easter.
The Motion, brought forward by Independents Peter Fitzpatrick TD, Peadar Tóibín TD, Sean Canney TD, Denis Naughten TD, Cathal Berry TD, Matt Shanahan TD, and Verona Murphy TD.
The motion would also have ensured that the 8.8 per cent employer’s PRSI rate covers the full national minimum wage level by increasing the 11.05 per cent threshold from €441 to €495.30 per week, commencing before Easter.
In addition, the legislation recognised that government policy decisions have significantly increased the cost of doing business, particularly in the SME sector, and that many SMEs are facing “significant cost challenges.”
The Restaurants Association of Ireland said on Wednesday that the motion was “extremely positive,” as it thanked the group of TDs for bringing it forward.
The RAI, which has 3,000 members across the country, said the motion would have “helped stem the current tide of restaurant and café closures and create a more fundamentally pro-SME environment.”
“The Government’s countermotion, which passed with 73 votes to 64, still commits to monitoring the situation and introducing potential solutions.
“We intend on continuing to make the case to the Government that the reinstatement of the 9% VAT rate is the only measure that will ensure a sustainable future for small, independent restaurants and cafés across the country.”
While the result of tonight’s vote in the Oireachtas is disappointing, the Restaurants Association of Ireland and our 3,000 members would like to thank the Regional Independent Group of TDs for bringing forward what was an extremely positive motion.
The Regional Independents’… pic.twitter.com/i5ij0jo8vT
— Restaurants Association of Ireland (@RAI_ie) February 14, 2024
During Wednesday’s debate, Peadar Tóibín TD pointed to a “rip off Ireland” which he said was “hammering so many people,” particularly businesses.
“The problem is that this Government has treated the indigenous enterprise sector very badly in the last number of years. These enterprises have suffered significantly,” the Aontu leader said.
“Most especially, the hospitality sector has suffered. In many ways this sector is like the canary in the coalmine. It suffers from reduced spending far earlier than most other business sectors and therefore is more prone to shocks within the economy as well.
“The hospitality sector suffered significantly under the Covid restrictions the Government delivered and it now owes an incredible €1.8 billion in Covid taxes. Rip-off Ireland, which is hammering so many people, is especially difficult for small businesses. Ireland is one of the most expensive countries in the world.”
Mr Tóibín accuses the government of being “in quids while small businesses are suffering.”
The worst thing is that the Government is a driver of these costs. The Government received more in VAT, excise and carbon taxes last year than ever before. In the middle of a cost-of-living crisis, the Government is quids in while small businesses are suffering,” he said.
“Products such as tobacco and alcohol in particular are extremely highly taxed here and of course that affects the hospitality business in a significant fashion.
“On top of this, the Government has heaped a number of other costs on small businesses, for example, increases in sick pay and the minimum wage and, soon, auto-enrolment.
While many of these increases are good for society in many ways, unfortunately the cost has been put on the shoulders of small businesses, without the necessary help from the Government. That is incredible.”
Deputy Cathal Berry told the debate that it was a topic that “rarely gets a mention” inside the Dáil.
“Government-specific cost increases that have come in over the last few weeks are causing major problems,” he said.
Deputy Berry went in to say that government cost increases were causing a big problem regarding hospitality.
“These are important businesses like cafés, family-run restaurants and gastropubs. The issue is not just the financial impact; it is the social impact as well. A lot of employees in our villages get their first job working in cafés and restaurants as waitresses and waiters,” he said.
“From a social point of view, in many villages around the country there is only one café. It is a case of no café, no community. The café is the centre of gravity of an entire village and it is very important that we keep these doors open.”
The Independent TD said it was “vital” that VAT is reduced from 13.5% to 9% – adding that it should be a permanent rate.
“It is the appropriate rate for food services in the hospitality industry, for sure. It would also help to drive down inflation and keep the doors open, which is very important,” Deputy Berry said.
“With the hospitality season kicking off for the summer, it is very important we get tourists in. If Ireland gets a bad reputation for being a high-cost economy, it will be very hard to change that narrative. We want Irish tourists staying in Ireland for their holidays rather than going to Spain and Portugal.”
Independent Ireland leader Michael Collins hit out at the vote, describing it as “absolutely scandalous.”
“This is what Fianna Fail, Fine Gael&the Greens think tonight of struggling small businesses Cafes, Restaurants and Pubs as they vote against a motion to cut the vat and save struggling businesses,” the Cork TD said.
“Absolutely scandalous. Politicians saying one thing in their constituency and voting different in the Dáil.”