Belfast Telegraph

Chef warns VAT hike will be ‘absolute disaster’ for restaurants

As of January 1, the rate for the hospitality sector will rise from 9% to 13.5%.

Chef Gaz Smith at Michael’s restaurant Mount Merrion Dublin (Niall Carson/PA)
Chef Gaz Smith at Michael’s restaurant Mount Merrion Dublin (Niall Carson/PA)

Many businesses are going to be left with no other option but to shut their doors due to the VAT increase, a Dublin chef has warned.

Gaz Smith described the looming VAT hike as an “absolute disaster” for restaurateurs.

“We’re left now in the position where we have to pass this onto the customers,” Mr Smith said.

“This couldn’t have come at a worse time because we’re walking into Brexit and no one knows how the chips will fall.”

As of January 1, the rate for the hospitality sector will rise from 9% to 13.5%.

Restaurateurs will either have to pass the increase onto customers, reduce the quality of ingredients or cut staff. It's a lose, lose situation Gaz Smith

The revenue-raising measure, abolishing the special rate, was announced in Finance Minister Paschal Donohoe’s Budget speech in October.

The reduced rate was introduced in 2011 on a range of goods and services, including accommodation, restaurants and hairdressers, in an attempt to alleviate some of the financial stresses on the tourism sector during the recession.

The cost of the initiative was estimated at 350 million euro per year.

“Restaurateurs will either have to pass the increase onto customers, reduce the quality of ingredients or cut staff,” Mr Smith said.

“It’s a lose, lose situation.”

The Wexford native, who started out in the industry at 15, returned from working in Vienna to take over Michael’s, a small neighbourhood restaurant in Mount Merrion, south Dublin, with his wife Rita. The husband and wife team celebrated one year in business in July.

He said the couple had been so cash-strapped when they were setting up the business that they could not afford to change the name above the door.

“We had 500 euro in our pockets and the new sign was going to be 450 euro so it was a choice of either changing the name or buying some food to sell,” he said.

“We bought some food and the rest is history.”

Mr Smith added that the special rate had given them the leeway to survive.

When Mr Donohoe announced the changes he said it had done its job, but Mr Smith does not agree.

“An almost 50% increase in the rate, it’s just ludicrous,” he said.

“It will have a knock-on effect. We’ll start seeing closures. There were some places that were hoping to get to spring but they have already given up the fight.”

Mr Smith said he and his wife had already turned down an opportunity to take on a second premises.

“We walked away – even before this VAT increase has taken place it’s putting fear into people.”

Earlier this month a number of Dublin city’s most popular restaurants ceased trading when Joe Macken’s Jo Burger Group went into liquidation.

“A combination of factors including challenging trading conditions have forced this move,” a statement from the company read.

Critics of the new VAT rate warned the hike will hit rural communities the hardest.

Deirdre McGlone, owner of Harvey’s Point Hotel in Co Donegal, agreed.

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Hotelier Deirdre McGlone, managing director of Harvey’s Point hotel in Co Donegal

“We’re beside the border, the economic recovery has been slower here than in Dublin,” she said.

“Decisions were made that were relative to Dublin properties rather than the family-run businesses around the country that struggle to survive all year round and to make ends meet,” she said.

The family-run hotel, which was rated Number One hotel in Ireland on Trip Advisor for five consecutive years from 2013 to 2017, is located on the Wild Atlantic Way, overlooking Lough Eske near Donegal town.

In the high season, it employs up to 160 people.

Ms McGlone said they had decided to absorb the increase as much of their business for 2019 had already been contracted.

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Harvey’s Point hotel in Co Donegal

“Our customers don’t understand that the VAT is collected by us for the Government. If we applied the increase we’d be perceived to be increasing our prices… we’d be perceived as poor value for money.”

She believes the VAT hike will not only damage individual businesses, but it will also damage Ireland’s competitiveness as a tourism destination.

She added that was the last thing rural businesses need as they face the uncertainty that Brexit brings.

PA

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