Fingal Dublin Chamber disappointed with Government’s decision to increase the 9% VAT rate for the hospitality sector

October 11, 2018 0

Fingal Dublin Chamber would like to express its disappointment at the announcement made yesterday by Minister for Finance, Pascal O’Donohoe to increase the 9% VAT rate to 13.5% as part of Budget 2019. This increase will take effect from the 1st January 2019.  This is a serious blow to the many small and medium-sized local businesses affected in the Fingal area who had just begun to find their feet and had started increasing employment levels which in turn generated valuable tax revenue.

fingal_dublin_chamberToday’s decision will impact not only hotels but the many local restaurants, spas, beauty salons, hairdressers, café owners, newspapers & magazines and various sporting & entertainment services. Of course, it will likely also impact the people of Fingal who could now face higher costs as some of these increases will invariably be passed on to the public.

Many of these businesses such as small restaurants work off very tight margins and as a sales tax, this increase is not linked to profit so many businesses will find this 50% increase in VAT extremely challenging. In addition, the simultaneous increase in minimum wage and the failure to address the punitive insurance costs will also push up costs and potential price increases could damage consumer sentiment.

It is particularly surprising that this decision has been taken as the impending threat of Brexit looms large.

Since the government introduced the reduced 9% VAT rate, over 65,000 jobs have been created in the tourism industry alone and it is estimated that it contributes over €2 billion in taxes for the exchequer and this is just one of many industries impacted by yesterday’s announcement.

This is not a business-friendly decision, it will suffocate the business growth of many small Irish owned businesses. It could also stymie potential expansion both in Fingal and nationwide which could have been a vital shot in the arm for the struggling offline high street. The potential tax windfall expected by the government will need to offset against this irreparable economic damage done to these largely domestic owned businesses, it would appear to many to be a counterproductive measure.