Give Me A Crash Course In ... Restaurant prices

The budget’s VAT hike will see restaurants facing price rises in the new year

In the budget finance minister Paschal Donohoe returned the hospitality sector to its 13.5 per cent VAT rate after an extended seven-year break on a 9 per cent rate

In the budget finance minister Paschal Donohoe returned the hospitality sector to its 13.5 per cent VAT rate after an extended seven-year break on a 9 per cent rate

 

Why’s that chef looking so cross? 
She’s probably trying to figure out how to present you with a higher bill for your dinner on New Year’s Day. 

What? Now I’m cross. Isn’t that the opposite of what a business does in January?
It is. But from the opening days of 2019 restaurants, bars, burger joints and hotels will have to charge customers 50 per cent more VAT. 

Says who?
Finance Minister Paschal Donohoe in his Budget on Tuesday, when he returned the hospitality sector to its 13.5 per cent VAT rate after an extended seven year break on a 9 per cent rate. As diners we never had it so good, but we probably didn’t notice because who reads all that boring stuff at the end of a till receipt? And we also didn’t notice because restaurant prices have been steadily climbing in the recovery as rents, salaries, ingredient costs and the price per gram of gold leaf to tweezer onto your chocolate fondant have gone skyward. Actually gold leaf prices are probably pretty stable but avocado costs are through the roof.

Crumbs. 
Indeed. That’s what many restaurateurs and chefs said, as Donohoe’s cleaver fell worryingly close to their pencil-slim profit margins.

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Were they expecting this?
Yes, while fighting it tooth and nail. They got a stay of execution in last year’s budget because of Brexit fears over a drop in tourism from the UK. But tourist numbers, like restaurant prices, continued to rise. The nine per cent was supposed to be a temporary little arrangement for the deep recessionary days of 2011 and scheduled to last two years. 

So the boom is back then?
Well yes, not across the board, but in a way that will be obvious to anyone trying to get a Saturday night table or book a last-minute midterm break. The sector behaves like a Prosecco cork in a storm. It’s first to be battered down when things get bad. But it bobs up fast when things recover, according to the Department of Finance officials who crunched the numbers on it in a report this summer.

Sorry I was on a gourmet mini-break Instagramming the tasting menu and missed it. What did it say?
That the nine per cent had done its job and it was time to hand it its hat and ask whether it had no home to go to. It had cost the Exchequer some €2.6 billion. Employment in restaurants between 2011 and 2016 rose by 41 per cent. Profits and turnover had returned to good health, and diners were expected to continue to eat out even if the VAT went up, because spending in restaurants is linked to disposable income levels and not price.  

Hang on a second. Weren’t newspapers given the 9 per cent rate too, so shouldn’t my restaurant reviews be costing 50 per cent more VAT from January 2019?
Mercifully no. The newspaper and publishing sector managed to hold onto the nine per cent rate. And not for happy reasons. That same report showing a 41 per cent rise in employment in restaurants showed a 13 per cent drop in the numbers of jobs in newspapers and publishing over the same period. 

Where will it all end? 
Who knows? Inundation of the island by an angry ocean probably. Oh sorry you mean in the restaurant world? A pretty miserable start to the year. Chefs will have to work harder to keep good ingredients on menus. More people will do Dry January, Veganuary and not-going-out-to-dinneruary. Then it’ll be business as usual as long as tourist numbers and disposable cash levels remain solid.