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Warning of retail closures if Govt does not cut VAT rate

Retailers are warning that the sector is facing mass closures unless the Government introduces a lower rate of VAT in order to help firms meeting rapidly rising costs.

Retail Excellence Ireland said a recent survey it has conducted found nearly half of members will not be able to cope with rising operating costs.

These include the recent rise in the minimum wage and statutory sick pay, high interest rates, warehoused tax debt and supply chain issue being caused by the Red Sea crisis.

“The Government is mistaken if it believes that hard-pressed retailers can absorb a series of rapidly mounting labour costs, punitive repayment terms, and ongoing supply chain issues – and still remain in business,” said Jean McCabe, chief executive of REI.

“The reality is that without significant financial support, specifically on VAT, we will see mass closures,” she added.

The organisation also points to new EU rules due to come into effect in the coming months that will require firms to pay invoices within 30 days.

The REI research also found that 83% of retailers have made changes to their operating model, like increasing prices or reducing hours, due to increasing costs.

Almost three quarters also believe current economic policies will disrupt their business over the coming year.

“Retailers are realistic and understand that we are navigating choppy economic waters, however the industry is being crucified on costs without any kind of meaningful relief,” Jean McCabe said.

“It appears that the Government does not understand that so many of our colleagues are close to shutting their doors for good,” she added.

The REI’s sentiments were echoed by the Irish Hairdressers Federation, which called for urgent Government action to help safeguard the future of the sector.

Hairdressers are calling for an increase in supports for hiring trainees and tackling the shadow economy

It said a recent survey of members highlighted severe difficulties following the increase to the national minimum wage and employees’ entitlement to paid sick leave.

“The critical issues facing our members relates to repayment of the warehousing scheme being over a very short period of time, this must be extended immediately,” said IHF President Lisa Eccles.

“Furthermore, energy, stock items and insurance costs continue to soar. We urgently require an increase in supports for hiring trainees and tackling the shadow economy,” Ms Eccles said.

The call for action comes a day after the Government announced the interest rate on tax debt frozen since the pandemic has been cut to 0%.

The Revenue Commissioners have also indicated that they will take a flexible approach to repayments which will allow for pay back arrangements spanning more than five years.

Later this week, employers organisation Ibec is to host a round table meeting of business groups to discuss the impact of labour costs and business competitiveness arising from recent Government measures.

The move was welcomed by small and medium sized enterprises organisation ISME, which said the “carnage” in the small business sector since the start of the year has been entirely predictable.

“While we are frustrated it has taken so long to acknowledge the issues facing small businesses in particular, belated recognition is better than no recognition at all,” said Neil McDonnell, the chief executive of ISME.

ISME added that the increase in VAT and labour costs between November and January has been too large for small businesses and consumers to absorb, leading to closures.

It said the 8.8% lower rate of PRSI must be extended to cover the full extent of the minimum weekly wage while the 9% VAT rate must be reintroduced for the hospitality sector.

It also called for the 23% VAT rate to revert to its historic 21% norm.


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