Cost of dining out set to rise when Vat rate is increased, industry group says

The Vat rate was initially reduced to 9% as a measure to protect businesses during the height of the covid-19 pandemic. File picture

The cost of dining out in towns and cities is likely to rise when the Vat rate is increased in September, the Restaurants Association of Ireland (RAI) has said.

The RAI and the Hairdressers Federation Ireland (HFI) are campaigning for the Government to retain the existing 9% Vat rate for hospitality in the upcoming budget, ahead of the planned increase to 13.5% on September 1.

Adrian Cummins, chief executive of the RAI, said it would be up to individual businesses to respond to the VAT rate changes, but he expected restaurants in urban areas to pass on the extra cost to consumers.

“What I can see from the reaction to business owners is, predominantly in rural businesses there will be a price resistance to the passing on of it [cost], where in large urban areas, I think it will be passed on substantially,” Mr Cummins said.

“That’s on a case-by-case basis, we as a trade association cannot tell our members what to do.”

The Vat rate was initially reduced to 9% as a measure to protect businesses during the height of the covid-19 pandemic.

The rate was previously due to expire in February, but the Government extended it for six months as part of a cost-of-living package.

The rate itself was initially raised from 9% to 13.5% as part of Budget 2019.

Lisa Eccles, president of the HFI, said they were hoping to meet with Finance Minister Michael McGrath “very soon” to discuss the rate and “listen to our concerns”.

“I would appeal to him [McGrath] obviously to sit down and have the meeting with us and hopefully we’ll see a good outcome for the 9% [rate],” Ms Eccles said.

She said the Government was currently “awash” with money and keeping the rate at 9% was an opportunity to help small businesses.

Mr Cummins said meetings had been held with both Fianna Fáil and Fine Gael backbenchers on the tax rate, which he said had been positive.

“There is an acknowledgment from backbenchers that small businesses that we represent here are under pressure,” Mr Cummins said.

“Sometimes, the minister for finance of the day takes a lot of soundings from his officials in the Department of Finance and may not realise what actually is happening on the ground outside of Dublin or within business itself.”