Covid-19: Publicans and restaurateurs row over calls for VAT cuts

Industry groups are split over a drive for a near €700m cut to VAT on pub alcohol sales

The restaurants group argued that a VAT cut on pub drink from 23 to 9% was unrealistic, given the cost, and said lobbying should be focused elsewhere.  Photograph: Tom Honan

The restaurants group argued that a VAT cut on pub drink from 23 to 9% was unrealistic, given the cost, and said lobbying should be focused elsewhere. Photograph: Tom Honan

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Serious tensions have emerged between groups representing restaurants and publicans over a campaign for tax cuts to save them from being overwhelmed by fallout from the coronavirus crisis.

The Restaurants Association of Ireland (RAI) had a row with groups representing publicans over a drive by the drinks industry for a near €700 million cut to VAT on pub alcohol sales in the Government’s promised July stimulus.

The RAI objected to the campaign at a Zoom meeting last month of umbrella group, Digi (Drinks Industry Group of Ireland), which includes hospitality businesses and also drink manufacturers such as Diageo.

The restaurants group argued that a VAT cut on pub drink from 23 to 9 per cent was unrealistic, given the cost, and said lobbying should be focused elsewhere. This week, pub lobbyists criticised their RAI counterparts.

On Monday, the Licensed Vintners Association (LVA), representing Dublin pubs, emailed its 700 members to say gastropubs “should know that the RAI refused to support this campaign”, which will be officially launched this weekend. “This certainly calls their commitment to pubs into question,” the LVA said.

Critical language

Later that day, the country publicans group, the Vintners Federation of Ireland (VFI), also told its members the RAI had declined to support its campaign, using identical critical language to the LVA.

In the hours between the two messages, the row took a twist when the RAI adjusted its position by calling for a cut to VAT for drink sales, but effectively targeted only at gastropubs, as opposed to all pub drink sales.

It called for a 5 per cent “composite” rate for food and drink sold together in a meal. This 5 per cent call aligns with a new VAT rate now being sought by the wider tourism industry.

The RAI said the composite 5 per cent rate would cost the exchequer €371 million. It suggested it could be funded by levying 10 per cent on off-licence sales, raising €331 million. Such a levy would not be good for the big drinks manufacturers with whom the publicans have joined forces for their VAT campaign.

The RAI’s adjusted position was mentioned by the pub group VFI in its missive to members later that night. “All this will do is create confusion and is a very disappointing move by them,” the VFI said.

More limited sales

The row has effectively split VAT campaigning within the hospitality sector. The publicans, backed by the big drinks manufacturers, will now campaign for a 9 per cent VAT rate on all drink sales, while the RAI chimes with the wider tourism industry’s push for 5 per cent on more limited sales.

At last month’s Digi Zoom meeting, it was suggested the full-year cost of slashing pub alcohol VAT from 23 to 9 per cent could be more than €670 million. However, publicans are initially seeking the change only until the end of 2020.

Adrian Cummins, chief executive of the RAI, on Wednesday defended his campaign as being for “our constituency of gastropubs”. He added that all lobbyists in the hospitality sector are “trying to save jobs and businesses”.

Donall O’Keeffe, chief executive of the LVA, said a VAT cut is essential as a “shot in the arm” for the pub sector. He also called for an extension to wage subsidies for pubs, as long as social distancing remains in place.

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