Hospitality Faces ‘Double Whammy’

The Irish hospitality sector faces a "double whammy" with the looming ending of the 9% concessionary VAT rate on services and a proposal to raise the minimum wage by 12 per cent.

The increase of more than 12 per cent in the minimum wage for next year, more than twice the predicted rate of inflation for 2023, is to be recommended by the Low Pay Commission.

If agreed by Government in the autumn, the recommendation, which is for an increase of €1.40 an hour on the current rate of €11.30, taking it to €12.70, will mean employees on the minimum wage who work a 39-hour week would earn an additional €54.60 per week from the start of next year.

The latest increase will have to be approved by Cabinet in the autumn but would be expected to receive Government support.

Meanwhile, restaurant owners have warned that if the reduced 9% VAT rate returns  to 13.5%  as planned at the end of August, it will put some out of business. In February the Government extended the 9% VAT rate further until September 1 as part of measures to assist those in the tourism, hospitality and personal care services sectors with rising costs.

The Restaurants Association of Ireland and Irish Hairdressers Federation have come together to push for a further extension of the rate, or for it to be made permanent. However, the Department of Finance has ruled out any further extension. Some politicians have also opposed an extension, citing high room rates in hotels and rising menu prices in restaurants.

The two organisations claim people are already finding it difficult to cope with the rising cost of living and putting up the cost of eating out and getting their hair done will not help.

“The Irish people don't want consumer taxes to be increased at this time when incomes are under so much pressure,” said Adrian Cummins, Chief Executive of the Restaurants Association of Ireland.

Data published this week showed that insolvencies in the sector were up 218% in the last six months.

Chief Executive of the Irish Tourism Industry Confederation Eoghan O'Mara Walsh said the VAT rate for the tourism sector should remain at 9%, claiming that an increase to 13.5% would be “inflationary”.