'Paschal's 50pc jump in VAT spells disaster', says worried chef Gaz
Many businesses will have no choice but to shut their doors because of the VAT increase, a Dublin chef has warned.
Gaz Smith described the looming hike as an "absolute disaster" for restaurateurs.
"This couldn't have come at a worse time because we're walking into Brexit and no one knows how the chips will fall," he said.
As of January 1, the VAT rate for the hospitality sector will rise from 9pc to 13.5pc.
The revenue-raising measure 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 €350m a year.
"Restaurateurs will either have to pass the increase on to customers, reduce the quality of ingredients or cut staff. It's a lose-lose situation," Mr Smith said.
The Wexford man, 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.
He said the couple were so cash-strapped that they could not afford to change the name above the door.
Mr Smith added that the special rate had given the restaurant the leeway to survive.
When Mr Donohoe ann-ounced the changes, he said the reduced rate had done its job, but Mr Smith does not agree.
"A 50pc increase in the rate, it's just ludicrous," he said. "It will have a knock-on effect. We'll see closures. There were some places that were hoping to get to spring, but they've 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," he said.
Earlier this month, a number of Dublin's most popular restaurants ceased trading when Joe Macken's Jo'Burger Group went into liquidation.
Critics of the new VAT rate warned the hike would hit rural communities the hardest.
Deirdre McGlone, the owner of Harvey's Point Hotel in Co Donegal, said: "We're beside the border and the economic recovery has been slower here than in Dublin.
"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."
The family-run hotel, which was rated number one in Ireland on TripAdvisor from 2013 to 2017, is on the Wild Atlantic Way, overlooking Lough Eske. In the high season, it employs up to 160 people.
Ms McGlone said Harvey's Point had decided to absorb the increase as much of its business for 2019 had already been contracted.
"Our customers don't understand that the VAT is collected by us for the Government," she said.
"If we applied the increase we'd be perceived to be increasing our prices. We'd be perceived as poor value for money."