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31st Aug 2023

Restaurants say new tax hike ‘will add to consumer inflation’

Stephen Porzio

restraurants tax

“The increase is wrong at a time when the country needs to reduce inflation.”

The Restaurants Association of Ireland (RAI) has slammed the decision by the Government to implement a tax hike for the hospitality and tourism sector from midnight tonight (31 August).

The VAT rate for hospitality and tourism decreased from 13.5% to 9%, for the period 1 November 2020 to 28 February 2023 in order to support the sectors during the Covid pandemic.

This reduced rate was then extended until 31 August 2023 as part of the cost of living support announced in February of this year.

However, the VAT rate is now set to return to 13.5%, a decision the RAI has taken against given Ireland’s current cost-of-living crisis.

‘Nonsensical’ tax hike

Dubbing the move as “nonsensical”, the restaurant group stated that the tax hike will “close the doors on many low-margin restaurants, cafes and food-led pubs across the state”.

The RAI also claimed that the rise would add to consumer inflation at a time when the Government promised it would not increase the cost of living.

On top of this, it said the change will move Ireland to the second highest hospitality VAT rate within the European Union after Denmark, as well as erode Ireland’s competitiveness as a tourist destination.

The Chief Executive of the RAI Adrian Cummins added: “The increase is wrong at a time when the country needs to reduce inflation, a VAT increase only adds to inflation.

“Government need to restore the 9% VAT for food-related Hospitality businesses in Budget 2024 and we will me making the case for this when we meet with the Minister for Finance next week.

“The increase the vat rate is the final nail in the coffin for many small cafes, restaurants and food led pubs.”

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