The drink and hospitality sector in Ireland has rejected comments by the Central Bank boss after Gabriel Makhlouf said he is “sceptical” about cutting VAT rates to help businesses.
The industry has called for a temporary VAT rate reduction to be included in the July stimulus package.
The Licensed Vintners Association (LVA), Vintners Federation of Ireland (VFI) and Drinks Ireland said it would give “targeted and tangible” support to one of the hardest hit sectors.
The group – which is calling for a reduction in the 23% VAT rate on alcohol until the end of the year – said the measure would provide an “instant cash injection” to 7,000 businesses.
Central Bank boss Mr Makhlouf said he is “always sceptical” of the value in reducing VAT rates.
A cash injection to businesses that are currently viable but living with the constant uncertainty and threat of Covid can help them to remain solventPadraig Cribben, VFI
Padraig Cribben, chief executive of VFI, said: “A cash injection to businesses that are currently viable but living with the constant uncertainty and threat of Covid can help them to remain solvent with direct and tangible financial support now.
“A VAT rate reduction on alcohol sales is a measure that will do just that, it is both temporary and targeted and will protect Ireland’s drinks and hospitality sector.
“We need to rely on evidence-based decision making and not opinion right now.
“The economy needs businesses to reopen so people can get back to work, earn a living and pay their taxes, reducing the reliance on Government support. Crucially, pubs need some certainty and today, that does not exist.”
The industry has also questioned the impact of other Covid-19 Government measures.
Representatives for the hospitality industry said that only 20% of the schemes in place to support businesses have been drawn down.
Donall O’Keeffe, CEO of the LVA, said: “A temporary reduction in the on-trade VAT rate on alcohol is not intended as a demand stimulus, which VAT rate changes tend to be.
“This is a new ask which has never been considered in Ireland before.
“It is achievable and easy to implement quickly. We need a short, sharp burst of financial support for our industry to get through the difficult trading period ahead, and this is the only way to do it effectively.
“Not only do pubs provide employment, they are the cultural epicentre of our city centres, towns and villages.
“The Government needs to make bold decisions to support the revival and recovery of our industry. A cut in VAT on alcohol on on-trade sales will give pubs the boost they need to reopen and trade.”
Patricia Callan, director of Drinks Ireland said a reduction in the VAT rate on on-trade alcohol is a “simple way” of getting money into businesses.
“Providing some certainty to businesses as they prepare to reopen is key,” she added.
“A reduction in the VAT rate on alcohol would provide certainty and allow these job-intensive businesses to remain viable with reduced demand and the increased Covid costs until trade improves towards pre-Covid levels in 2021.
“Reduced rates of VAT for hospitality businesses are established Covid response policy instruments.”