22,500 jobs at risk as drinks industry calls for VAT reduction in wake of phase 4 delay

More than 60% of pubs remain closed around the country, with those poised for a July 20 reopening now pushed back until August 10. 

Members of the drinks industry in Ireland are calling on the Government to temporarily reduce the hospitality VAT rate and extend it to apply to alcohol sales in the on-trade until December 31.

The collective call, from the Licenced Vintners Association (LVA), Vintners Federation of Ireland (VFI) and Drinks Ireland, comes as more than 60% of pubs across the country remain closed due to Covid-19 restrictions.

On Wednesday, it was announced that phase 4 of the Government’s reopening plan is now delayed from July 20 until August 10. A number of pubs that serve food reopened their doors in phase 3 on June 29.

Reducing the VAT rate, which is currently at 23%, would generate immediate support, allowing businesses to trade through the reopening period and maintain jobs until trade picks up, says the representative group. This measure is intended to boost the viability of the businesses, rather than stimulate demand.

The group claims there are 22,500 jobs at risk in the drinks sector. Pubs are on track for a 50% decline in business for the remainder of 2020.

The group cites reopening restrictions, such as reduced capacity with time-limits on customer visits, coupled with zero tourism, leaving many pubs struggling to meet costs and trading at a loss.

LVA CEO Donall O’Keeffe said Ireland’s VAT rate is significantly higher than other EU countries. “We were among the first sectors to close on March 15. We are among the last to reopen with many pubs now not permitted to reopen until August 10 or after, there is no certainty. When we do, we will do so under very unique circumstances, completely at odds with what it means to enjoy our culture and heritage in the pub.

“We have had to completely change our business model and the VAT model (VAT on in-trade alcohol sales) should change to reflect our new reality.

“Government guidelines mean we will operate at 50% capacity or less, yet our VAT burden currently remains the same – this is inequitable and should change, similar to measures taken on VAT in other EU countries.

“Our VAT rate on alcohol is significantly higher than EU averages. It is our strong view that a temporary reduction and extension of the hospitality VAT rate to alcohol sales in the on-trade, until December 31, 2020, should be implemented. This will provide tangible support and show solidarity with this industry. This is about businesses surviving.”

VFI chief executive, Padraig Cribben said many pubs won’t be in position to reopen August 10. “The financial burden on pubs as they adapt to the new measures of social distancing, reduced capacity, expenditure on perspex screens and PPE, is significant. For many, it will be too much, and they won’t be in a position to re-open on 10 August.”

Patricia Callan, director of Drinks Ireland, said, “The drinks and hospitality industry represent a significant network of businesses throughout the country who require support, given the exceptional circumstances of Covid-19 which requires action and bold decision making to drive economic growth.

“It is critical that the Government provides targeted financial supports for hospitality businesses to assist them in reopening, particularly now as the date for reopening pubs has been extended by a further three weeks to August 10 and potentially beyond.”

Follow the LVA, VFI and Drinks Ireland campaign on social with #NewGovProtectOurPubs.

Main photo: Ola Rojeck, Martin Murphy (right) and Macdara Ó Móráin with Ronan Lynch, owner of The Swan Bar, Dublin as part of the #NewGovProtectOurPubs campaign. Photo: Mark Stedman