A new tax increase – which will see the prices of food and drink soar – comes into effect this week.
Consumers will notice an increase in price on products supplied by the Irish hospitality business, as a result of an increased VAT rate which kicked in from 1 January 2019.
The special 9% VAT rate for Irish hotels, restaurants and hairdressing was increased to 13.5% in last year’s budget.
Up until the first day of this year, Ireland benefitted from a special 9% VAT rate introduced in 2011 as permitted by the EU. The reduced rate was designed to boost the Irish hospitality sector following the recession.
However, Finance Minister Paschal Donohoe says the reduced rate can no longer be justified because of the strong performance of the tourism sector.
With the newest increase in tax, representatives of the Irish hospitality industry now believe that a number of independent businesses will close.
Cafés and restaurants have warned customers that an increase in food and drink prices should be expected to cover costs.
Colin Harmon, owner of independent restaurants 3FE, Gertrude and Five Points, took to Twitter to voice the opinion that the higher tax percentage as increased by Minister Donohue will close businesses.
This is an indicative breakdown I did in my book on the cost of a cup of coffee. If the VAT increase was absorbed in this instance it would decrease the net profit by 13c. That’s half the net profit gone in one go. That closes businesses, costs jobs. pic.twitter.com/t7DXl6AnZ8— Colin Harmon (@dublinbarista) January 2, 2019
The Irish Heart Foundation, however, welcomes the news of the higher tax percentage, as they believe higher prices for takeaway food will help to combat the growing obesity crisis.
The Sugar Tax was introduced to Ireland in May 2018 with the aim of slowing down the obesity problem ravaging Ireland's population. It applies to drinks with a sugar content of five grams or more.