Home Institutions Legislation Impact of ris...

Impact of rise in Vat still to be assessed in the Irish coffee shop market

DUBLIN, Ireland – The Irish restaurant and tourism industry entered the New Year with the threat of Brexit looming and the reality of a hike in Vat rates that produced a price rise and complaints from Dublin coffee shops.

It is still too early to assess the impact of the rise in Vat from the temporary 9% rate that the hospitality industry has enjoyed since July 2011 – when it was introduced to fight a deep recession – to the 13.5% main rate.

Some retailers immediately passed the rise onto consumers. The price of a cup of coffee at Dublin-based chain 3FE rose 4pc from €3.50 to €3.65, while at Insomnia, a 12-ounce Americano rose 10 cent to €2.80.

“When good and bad things happen, people tend to look at the price of a cappucino,” 3FE founder Colin Harmon told the Irish Independent.

If people were looking at the price of a cappuccino, it was likely to be the more affluent members of society. According to research from the Department of Finance, the Vat cut cost €2.6bn in lost revenues and disproportionately benefited the better off who have higher levels of disposable discretionary income.

The Vat cut had also worked. Employment levels in the sectors covered by the emergency rate surpassed their previous peak in the second half of 2014, while all other services only hit those levels in early 2016.