Call to keep low 9% Vat rate for cafes and shops

Call to keep low 9% Vat rate for cafes and shops

Eamon Quinn

Finance Minister Paschal Donohoe should keep the low 9% Vat rate for small service providers, such as hairdressers and cafe owners, and introduce a tax credit to help shops build out websites to compete with large online retailers, industry group Retail Ireland has said.

The proposals come amid a debate about the high €527m annual cost in lost tax revenue from the reduced rate of 9% which former Finance Minister Michael Noonan cut from 13.5% at the height of the jobs crisis seven years ago.

The low rate, which covers holiday accommodation, restaurant services, newspapers, hairdressing and various entertainment services, has been attacked by trade unions and other critics as providing a large subsidy to huge hotel chains, which have raised prices as the tourist market booms.

However, Ibec’s Retail Ireland is concerned that small service retailers such as cafe owners who provide large amounts of employment will become “collateral damage” in the debate and lose out even though they account for only a small fraction of the annual cost to the state of the low rate.

In a pre-budget submission, director Thomas Burke said small retailers selling newspapers, coffee, and food, as well as hairdressers, should be allowed to continue to benefit from the reduced rate and should be exempt from any move by Mr Donohoe to increase the rate back up to 13.5%.

Mr Burke said ways could be found to exempt small retailers from any increase.

In an annual assessment, Finance Department officials cited Revenue Commissioner estimates that showed restoring the 13.5% rate for all businesses favoured by the lower rate since 2011 would harvest an additional €527m in revenues.

The measure was envisaged originally as temporary. It has cost the State €2.7bn since its introduction, according to the Finance Department assessment.

Mr Burke said providing a research and development tax credit to help retailers build websites would cost the exchequer €13m to €15m a year.

It would also help the State by stemming the revenues lost to large international online retailers.

More in this Section

Thousands of holidaymakers face chaos over British Airways strikesThousands of holidaymakers face chaos over British Airways strikes

40 jobs to be created after whiskey distillery given planning permission in Donegal40 jobs to be created after whiskey distillery given planning permission in Donegal

Trump announces new retaliatory tariffs on ChinaTrump announces new retaliatory tariffs on China

Oil and stocks fall as trade row heats upOil and stocks fall as trade row heats up


Lifestyle

These green pancakes are topped with avocado, tomato and cottage cheese.How to make Jamie Oliver’s super spinach pancakes

Who else can pull off a look described as a ‘hip-hop Michelin woman’?As her new EP drops, this is why there will never be a style icon quite like Missy Elliott

The classic white-tipped look is once again in favour, and celebs are loving it.The French manicure is back – 5 modern ways to try the trend

The A-Listers hiding in plain sight: As Rihanna is spotted at the cricket, who are the celebs who have been living under our noses in Ireland? Ed Power reports.Celebs in plain sight: The A-Listers living under our noses in Ireland

More From The Irish Examiner