Tánaiste defends lower rate of VAT for food businesses and hairdressers
By Bairbre Holmes, Press Association
The Tánaiste has defended the decision to reintroduce a lower VAT rate for restaurants, cafes and hairdressers.
The new 9 per cent rate, down from 13.5 per cent, will take effect on Wednesday.
Speaking to reporters in Dublin city centre, Simon Harris said around 99 per cent of food and catering businesses are small and medium-sized enterprises (SMEs).
Questioned about whether the move amounted to a tax cut for large multinational organisations like McDonald’s and Starbucks, he said they “represent 0.4 per cent of the sector”.
He added: “They operate in Ireland on a franchise basis, often owned by local people creating jobs in local communities as well.
“That is indeed a measure that will apply to businesses of all sizes in the sector, that’s true, but it is also true that the data shows that they’re overwhelmingly Irish-owned, and overwhelmingly Irish-owned small and medium businesses.”
Mr Harris was asked about reports that his own department, the Department of Finance, claimed this measure will not achieve its objectives.
He said: “My department has not said to me that this won’t achieve my political objective, because my political objective is really straightforward: give small businesses in rural and regional areas a break and this does that.”
Minister for Enterprise, Peter Burke, interjected to support the Tánaiste, citing Central Statistics Office (CSO) figures which he said showed an 8.8 per cent reduction in employment in the hospitality and food services sector.
He said measures like the VAT reduction are “so important to shore up that sector and support small businesses”.
Asked if the measure would lead to lower prices for consumers, Mr Burke said: “First of all, it’s very clear that an affordability measure and a viability measure do not go hand in hand.
“So, this is a viability measure to really shore up business.”
He also said food and hospitality businesses have been “experiencing extraordinary costs”, which has led to “serious pressure on the margins”.
The reduction in VAT “brings more business, brings more competition,” he said “and through competition that gives us a better value proposition on price”.
