Notes on the Front

In order to assist restaurants, cafes and coffee shops, the Government intends to cut VAT in the upcoming budget at a cost of nearly €700 million.  There’s one problem:  restaurants, cafes and coffee shops will receive only a small proportion of that tax cut.

The biggest beneficiaries will be fast-food outlets. 

Bord Bia breaks down consumer spending on food services by market segments. 

Consumers spent over €7.3 billion on food services in 2024. 

• Only 13 percent of that total spend went to full-service restaurants.

• Only 6 percent was spent in coffee shops and cafes.

Where was the bulk of consumer spending on food services? 

• 41 percent was spent in limited service outlets. Most of this consumer spend was in fast-food outlets (McDonald’s, Supermacs, etc.).  The remainer was spent in places like  convenience stores, petrol stations with forecourts, etc.

• 18 percent of food service spending was in hotels. Food service represents 20 to 30 percent of hotel revenue. And for hotels, food service is a money-spinner with gross margins as high as 65-75 percent.

So here’s the deal:  a VAT cut for food services would cost €675 million.  But less than 20 percent of that cut would benefit restaurants, cafes and coffee shops.  Nearly 60 percent would benefit fast-food outlets and pubs. 

Cutting VAT is being sold as a means to assist restaurants and coffee shops.  Minister Peter Burke stated:

“I've been in coffee shops and indeed restaurants where I've seen their margins diminish and some making a very significant loss that they weren't the prior year, considering in many cases their trade and turnover has sustained.”

The problem is that those same coffee shops and restaurants that the Minister frequents will see very little of that VAT cut.

Even if you believed that restaurants and cafes were under so much financial burden that they needed assistance, cutting VAT is an extremely inefficient and costly way to provide that assistance. 

Is there anyone in Government willing to call out this nonsensical policy?  It is not too late.