INDUSTRY NEWS: THE VAT RATE on restaurant meals should be lowered in order to attract more tourists to Ireland and create more jobs in the hospitality sector, the Restaurants Association of Ireland (RAI) said yesterday.
The call comes in reaction to the French government's lowering of its VAT rate from 19.6 per cent to to 5.5 per cent on food and drinks in cafes, bars and restaurants from July 1st. Ireland's VAT is currently 13.5 per cent.
"We would like to see [ the French example] being replicated possibly across the EU and Ireland being taken on board," said Adrian Cummins, chief executive of the RAI.
EU member states can apply a reduced VAT rate to restaurants for both food and beverages. John Power, chief executive of the Irish Hotels Federation, said that Ireland should at least lower its wine and alcohol VAT from 21.5 per cent to 13.5 per cent, and should lower its VAT on restaurants to between 5 and 7 per cent.
Brian Meenan, a spokesman for the Department of Finance, said "restaurants and hospitality services in general attract a reduced rate of 13.5 per cent in Ireland as it stands".
While the new EU ruling means that Ireland could lower its VAT rate to 5 per cent for restaurants, there are fears that other sectors will demand a similar cut. According to Brian Meenan, a 1 per cent reduction in the food and drink VAT rate would cost around €300m.
"I think the government would be missing a major opportunity if it buried its head in the sand and said 'we can't afford to do that'," John Power said.
Mr Cummins said Ireland was one of the most expensive places in Europe to run a restaurant and that with visiting tourist numbers already down by about 10 per cent this year, high prices were deterring travellers seeking to save money during a global recession.