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Why independent coffee shops in Ireland are in trouble: ‘Big chains can weather these increases. We can’t’

Big, booming hotels are paying the same VAT rate as small cafes. That’s not fair, say smaller operators

Small independent hospitality businesses in Ireland are asking for a very simple thing. They say they need a VAT rate of nine per cent to help them survive. Will Government listen? It talks a lot about supporting small businesses. Such declarations were core to Simon Harris’s fist-pumping speech to the party faithful as taoiseach-in-waiting.

More recently, on Wednesday, April 3rd, after a meeting with the Fine Gael Small Business and Enterprise Council, Harris said, “Small businesses are at the heart of our communities. They are crucial to the local economy, to employment in the regions and to the social fabric of our country.” This is soundbite stuff, of course, the kind of generic patter Harris has honed to ascend to the office of Taoiseach on a wave of comms rather than action. But action is required.

Talk is cheap; VAT isn’t. In September 2023, this specific VAT rate – reduced during the pandemic – jumped from nine per cent to 13.5 per cent. This encompasses restaurants, cafes, bars, as well as hotels – a blanket rate for a hugely diverse number and size of businesses. It applies whether a hospitality business is part of a billion-euro portfolio, or run by a one-woman-band. Last week, Cork’s Alchemy Coffee & Bookstore posted a message on social media asking people in Ireland to support the call for a nine per cent VAT rate, citing increases in VAT, wages, ingredients and energy bills, combining to bring the industry to “its knees”.

A “VAT 9″ movement is going to build. Every independent operator I speak to in hospitality talks about “one thing after another”; energy bills, VAT, the price of everything from butter to paper soaring, rent increases, how staffing crises intersect with rising wages, and on and on. Surely a smarter, stratified model of VAT could be designed to equal the playing-field for local independent businesses?


I don’t work in hospitality, but many people I know do. Their voices need to be central to any discourse on the crises they’re facing. Over the course of the pandemic, I watched Colm Keane, who runs Daddy’s in Rialto in Dublin 8 – an award-winning village cafe with a huge focus on Irish produce – work every angle for the business to survive and thrive.

“The income isn’t there to support it”, he says of the VAT rate of 13.5 per cent. “I’m talking about small independent businesses like us. Big, booming hotels are paying the same VAT rate as small cafes. All of us being turfed into the same VAT bracket is the equivalent of a middle-income earner being put in the same tax bracket as a high-income earner.”

For Keane, the impact is inevitable: smaller, independent operators will be squeezed out, and the presence of large international chains, such as Pret A Manger, who can soak up costs, will increase. “You don’t have a lot of recoverable VAT in a small food business, unlike a bigger business. So you just become a VAT collector for Government. Then you’re forced to put up your prices. But if you keep increasing those, nobody will be going out and buying anything. What I don’t think the public understands is that we are already absorbing so many increases.”

“Successful places are closing. They see the writing on the wall. I know this has gone out of the discourse, because there’s so much happening in the world, but independent places that are full, busy, great social media, doing as much as they can, they’re all struggling. There’s not a lot more that we can do. It’s not like ‘Oh, they closed because they didn’t have a great business model.’ They have great business models. So what are we all to do, people like us supporting local suppliers? Buy cheap produce from overseas?”

Local cafes, little restaurants, they’re such an important part of the community. They’re more than just someone selling you a coffee

—  Colm Keane

The existential question independent cafe, bar and restaurant owners increasingly face is: why bother? The answer tends to lie in passion, purpose, creativity, community, for people to make something of themselves. They want to push themselves, and leave their mark. But you can’t lodge enthusiasm in the bank.

I’ll leave the last word to Keane. “I haven’t seen anything to support small businesses since Covid. All we ever see with how Government treats businesses is a lot of ribbon-cutting for FDI corporates. I don’t see initiatives on the ground. I don’t see any action happening fast. People have been screaming about this for months. Why are we always at the point where the straw is about to break the camel’s back? Why isn’t Government being more intelligent on this? Government seems to always wait until we’re really suffering ...

“Local cafes, little restaurants, they’re such an important part of the community. They’re more than just someone selling you a coffee. They represent a social importance. We have a community here; breastfeeding meet-ups, a place to hang out and chat. There’s a reason to protect these things. I don’t know any more. International chains who are working on economies of scale and have deep pockets can weather these increases. We can’t.”