WITH BUDGET NEGOTIATIONS set to go down to the wire, much still remains undecided – but if Enterprise Minister Peter Burke gets his way, shop delis will be among the businesses to benefit from a cut in VAT for hospitality. 

The push for a cut to the hospitality VAT rate from 13.5% to 9% has largely been led by restaurants, with the Restaurants Association of Ireland long arguing it would help alleviate pressure on what it says is a sector in crisis. 

Others, however, have argued that a cut would be a blunt and costly instrument, benefiting a huge number of businesses that are not in need of support — fast food chains like McDonald’s, Domino’s and Supermac’s, among them. 

The government has been exploring whether it could exclude these large fast food chains from the cut, but it is understood that this is unlikely to happen. 

Some €1.5bn is available to the government this year for taxation measures. If it proceeds with the VAT cut for the entire hospitality sector (including hotel accommodation), it would come at a cost of approximately €870m — over half of the amount available for tax cuts.

Research from the Irish Fiscal Advisory Council (Ifac) has found that this is the equivalent of hiring 11,400 nurses or 7,800 teachers. 

Even if hotels are excluded, the cost of the VAT cut for restaurants has been put at €675 million. 

It is these sorts of decisions that Finance Minister Paschal Donohoe and Public Expenditure Minister Jack Chambers will be finalising ahead of Tuesday’s Budget announcement. 

Delis

Shop delis have largely slipped under the radar in discussions of the VAT cut. 

The Journal understands that they will benefit from the reduction under plans being considered by the Department of Enterprise. 

Anyone who enjoys the odd chicken fillet roll will be well aware of the rise in prices in recent years.

Gone are the days when you could get a roll, a drink and a packet of crisps for a fiver. Today, one will set you back anywhere between €4.50 and €7.

So will a VAT cut for delis mean consumers will see a drop in the price of their chicken fillet roll or other deli treats?

Sadly, no. 

Speaking to The Journal, Finbarr Filan, chair of the small business association ISME, said the VAT cut would merely enable shops to stay open and keep doing business. 

Filan, a shopkeeper in Sligo, said his business costs have increased by €150,000 per annum in the last two years. 

“And that has to be passed on [to consumers]. The government keep putting up the costs on businesses… The vast majority of small businesses are just about breaking even, and there’s no place for them to go any more,” he said.

“The VAT is only one small portion of trying to keep businesses afloat. The cost increases are no longer sustainable,” he said. 

The Budget will be announced next Tuesday, 7 October.