Restaurants across Ireland are facing insolvency and should not have to increase their VAT rates with hotels. 

That’s according to Restaurants Association of Ireland Executive Adrian Cummins, who said the food service industry is entering “the perfect storm”. 

Insolvency rates in the hospitality sector have increased by 214% in the first half of 2023, according to credit risk analyst CRIFVision-Net.

Despite that, the Government is due to increase the VAT rate from 9% to the previous 13.5% in September. 

“When I saw the figures for insolvency yesterday, it just shows that there is an issue specifically around food,” Mr Cummins told Newstalk Breakfast.

“There are no insolvencies in accommodation. It's predominantly and nearly absolutely involved in the food service industry. 

He said restaurants should not face a VAT increase as it enters the quieter autumn season.. 

“We’re the sector with the highest number of insolvencies in the country in terms of percentage in the last six months,” he said. 

“I can see that number of insolvencies increasing in the autumn period, so we’re in challenging times." 

Hotels versus restaurants

Mr Cummins said it is not fair that the Government sets the same VAT rates for hotels and restaurants when the hotel sector is not struggling.

“It’s not impossible to separate [VAT] because we're doing this already,” he said.  

“Anybody will tell you that when they go out for a meal, you have a bottle of wine that’s 23% VAT and 9% for food. 

“That’s an absolute red herring from the Department of Finance.” 

Budget surplus

According to Mr Cummins, Government backbenchers “are hoping for a separation”, and he believes it is entirely feasible to keep VAT down for the food service sector.

“Everybody knows the country has a substantial amount of revenue coming in at the moment in terms of the Budget,” he said. 

“Now is not the right time to increase the VAT rate. We’ve always said 9% is the right amount of VAT... the conversation needs to be had if it’s right to increase it in September.” 

He said more and more restaurants are closing, and a VAT increase will only make it worse. 

“That’s not even getting into the towns and villages where you’ve had all of the accommodation taken out of circulation, so you have no tourists in the local economy,” he said. 

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