Irish tourism and hospitality groups have this week urged the government to stave off a 'growing commercial crisis' within the sector before it is too late.
This comes following a new economic report examining the root causes of a worrying downsizing among hospitality food businesses throughout the country with average margins for food services have having dropped to 1.9% of turnover compared with 7.2% in 2019.
Hospitality Businesses
The report by economist Anthony Foley reveals that, even when operating under the previous 9% VAT rate, hospitality businesses within the wider tourism industry generated record levels of taxes for the exchequer.
Last year, net tax receipts from the hospitality sector alone reached an all-time high of €1.86 billion according to an analysis of data from the Revenue Commissioners. Figures show that, prior to increasing the rate of VAT last September, the hospitality sector was already generating at least €585 million in additional taxes for the State on an annualised basis compared with 2018, when the rate of VAT was also at 9%.
More Direct Closures
The report concludes that, in the absence of measures such as a restoration of the 9% rate of VAT, the sector will experience a significant decline with many more direct closures and job losses with additional indirect negative economic impacts.
Modelling a potential 10% impact on the sector, the report found that such a scenario could lead to a reduction in overall tourism and hospitality expenditure of over €1 billion, a drop of €174 million in taxes and potential job losses of over 21,000.
The chief executives of the Irish Tourism Industry Confederation (ITIC), Restaurants Association of Ireland (RAI), Vintners Federation of Ireland (VFI), Irish Hotels Federation (IHF) and Licensed Vintners Association (LVA) called on the government to take urgent action to address the enormous challenges facing food service business.
'Government Inaction'
'Government inaction now poses an enormous risk to our wider hospitality and tourism industry which, as one of Ireland’s largest indigenous employers, supports over 280,000 livelihoods some 70% of which are outside of Dublin. It is essential that the government does everything possible to assist struggling businesses and put our sector on a more stable footing,' the group said in a statement.
'At a minimum, this must include the reinstatement of the 9% VAT rate for food-related hospitality services in the upcoming Budget. Anything short of this will further fuel the crisis facing large parts of our sector with worrying long-term implications for the viability of Irish tourism and hospitality.'
