A total of 577 restaurants, cafés and other food-led businesses have closed their doors for good since the VAT rise from 9% to 13.5% last September, according to the Restaurants Association of Ireland (RAI).
In July, 45 restaurants, cafés and other food-led businesses ceased trading.
'Wave Of Closures'
“Many food-led businesses are holding on by a thread, hoping the busy season will provide some relief and that the government will act in October’s Budget to restore the 9% VAT rate," said Adrian Cummins, CEO of the Restaurants Association of Ireland.
“But the reality is that these businesses are still in crisis and, without a return to the lower VAT rate, we are guaranteed to see another wave of closures as we leave the summer behind and move into the hospitality sector’s quieter months."
Tough Decisions
The RAI has warned that food-led hospitality businesses have been faced with a decision to either erode their competitiveness or take a 4.5% hit to the bottom line.
In a recent survey of 212 members of the Restaurants Association of Ireland, 74% of respondents believe they will have to close their businesses if the VAT rate on food is not reinstated to 9% in October’s Budget.
Additionally, 66% of respondents admitted they would have already shut their doors if not for the ongoing campaign advocating for the return of the lower VAT rate.
'A Broken Model'
"The current situation is unsustainable and our members face a broken model," said Cummins.
"Restaurants are busy but costs have risen to an extent that has resulted in margins all but collapsing."
Economic Impacts
The RAI referenced a proposal by the Department of Finance which estimates estimates that a return to the 9% VAT rate would cost in the region of €545 million per annum.
According to the association, closures have now reached a level that means the higher rate of VAT on restaurants and cafés has started to actually cost the State money because of unintended knock-on economic impacts which the Department’s modelling fails to acknowledge.
"Budget 2025 will be judged by the entire hospitality industry solely on the government’s decision to reinstate the 9% VAT rate on food or not,” said Cummins.
