herald

Monday 22 October 2018

'This VAT increase has just cost 5,000 jobs' - restaurants want Ross's head on plate

Hairdresser David Marshall at his Fade St premises
Hairdresser David Marshall at his Fade St premises

Up to 5,000 jobs will be lost in restaurants, cafe and bar food businesses because of Shane Ross's failure to stop the VAT increase and he should resign immediately, the head of Ireland's restaurant association has said.

Jobs have also been put on the line by the VAT hikes in the hairdressing business, said leading stylist David Marshall.

"I'm flabbergasted. I can't see it not putting people out of business," said the top Dublin hairdresser.

Budget 2019 will increase VAT rates from 9pc to 13.5pc in January for hotels, restaurants, cafes, hairdressers, cinemas and theatres.

"This VAT increase has just cost 5,000 jobs in restaurants, cafes and bars serving food," said Restaurant Association of Ireland chief executive Adrian Cummins.

"Minister Ross failed to defend us in the negotiations in the Budget.

"If VAT increased from 9.5pc to 11pc then we might have given the minister a pass mark. But we give him zero percent for complete failure and he should now resign."

The higher VAT rate will come into force on the same day that the minimum wage goes up from €9.55 to €9.80, so his 3,000 members will be hit twice, Mr Cummins added.

He said 80pc of the coming job losses would be due to the VAT hike while the other 20pc would be caused by the hike in the minimum wage.

"This is a black day for us. In one fell swoop we have these increases and the arrival of Brexit in March," he told the Herald.

"This is deeply annoying. It will cost the industry €440m next year. It's a 50pc hike in our VAT bills."

Mr Cummins said the VAT hike would lead to the loss of 10,000 jobs if the hotel sector was included.

The rate increase would have a particularly negative impact in the Border areas and in the Midlands, he added.

Bad

"Dublin is fine but down the country this will be very bad," Mr Cummins said, adding that it would be "the end" for some restaurants.

Hairdresser Mr Marshall was "flabbergasted" to learn of the VAT rate hike.

"It's too much, it really is," he said. "They are squeezing the life out of the hairdressing business."

The VAT rise comes on top of the commercial rates set by the city council which have also gone up in recent years, he said.

"In our case, they went from €16,000 to €24,000 a year," Mr Marshall added.

"Now they are talking about putting up the VAT while we are in the process of reducing our prices.

"The whole dynamics of the business has totally changed.

"We are a very labour-intensive business. The hairdressing industry is giving a lot of employment.

"I think they don't seem to recognise this.

"It just puts pressure on taking on extra employees.

"Rents have gone up, rates have gone up, VAT is now going up - it really is squeezing the last ounce of life out of it.

"We can't pass on that extra charge to clients...because they just stop coming and I can understand clearly why," said the hairdresser, who is based on Fade Street and South Great Georges Street.

"I am very surprised and I am very shocked and I am actually very concerned to be honest with you," he said.

"The margins now are so tight already. I can't believe it to be honest. I can't see it not putting people out of business."

Hoteliers said the VAT hike was "a devastating blow" and a setback for rural Ireland.

Irish Hotels Federation president Michael Lennon said: "The increase is a serious jolt to the tourism industry.

"It represents a reckless failure to recognise its economic potential and importance, particularly to rural Ireland."

Mr Lennon urged Mr Ross to defer the increase until there was clarity over Brexit and to allow existing contracts for group bookings to be completed as prices have already been agreed.

"Ireland will now have a higher tourism VAT rate than 26 countries in Europe with which we compete," he said.

"We are already a very high- cost economy by international standards so it is astonishing that the Government is now imposing additional taxes on tourists and making our country less attractive as a destination.

"Regional businesses will bear the brunt, as about €300m of the €466m in additional taxes will be taken from the rural economy, which has been slower to recover from the economic crisis.

"This is a devastating blow for the many tourism businesses that struggle to break even or stay open outside the peak season."

Crutch

Mr Lennon said the industry was already facing enormous difficulties due to the uncertainty around Brexit and weakened sterling.

"Today the tourism industry supports over 235,000 jobs in every county and town, generating over €2bn in taxes each year," he said.

Fianna Fail's finance spokesman, Michael McGrath, said the 9pc Vat rate "was always designed as a temporary crutch until the sector repaired itself".

"The tourism and hospitality sector has had the benefit of the reduced rate for seven years," he said.

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