Dublin Café Owner Criticizes VAT Cut as Ineffective for Small Businesses

A café owner in Dublin has expressed strong concerns over the recent VAT cut implemented by the government for the food sector. Jonathan Barr, who operates East Village Coffee in Clondalkin, described the measure as a “blunt instrument” that inadvertently positions the public against small businesses. He articulated that a more tailored approach would have significantly benefited smaller establishments rather than multinational chains.

Mr. Barr stated, “They should have changed employer PRSI contributions. This VAT measure will benefit many wealthy chains who already benefit from low prices because they are negotiating deals to buy milk for 200 different stores.” He highlighted the disparity in purchasing power, noting that he lacks the same negotiating leverage enjoyed by larger corporations.

The VAT cut is projected to cost the state approximately €910 million by the end of 2027. Barr criticized the public perception that this reduction in VAT is the reason ordinary workers did not receive a tax adjustment in the recent budget. “It pits normal workers, who have seen no effect from the Budget, against the industry when there are much better and more targeted ways to have done this,” he said. He also lamented the absence of a more favorable income tax deal for entrepreneurs.

Business Struggles Amid Rising Costs

Barr emphasized the sacrifices made by small business owners, including his own experience of creating jobs in the community. “I’ve created a dozen jobs here in my village and I’m making roughly the same as I did before when I was an employee at a company and just switching off after work. If you are creating jobs, there should be a reward for taking that risk,” he argued.

While he welcomed the extension of a lower 9% VAT rate on electricity and gas until 2030, Barr pointed out that many people are unaware of the steep operational costs faced by small businesses. He shared a recent example of a €2,300 electricity bill for just two months, illustrating the financial pressures that many café owners endure.

Barr remarked, “People will wonder why they heard all about this big tax-spend on hospitality, and they see that our prices haven’t fallen.” He explained that despite the VAT cut, survival in the current economic climate remains challenging.

Despite starting with a latte priced at €3.20 nine years ago, Barr has had to increase the price to €4.20 to keep pace with inflation and rising costs. He indicated that even higher prices may be necessary to offset the dramatic increases in operational expenses. “If we really wanted to keep up with the huge jump in costs and inflation, we should charge €6,” he stated.

Barr concluded by expressing his passion for his work, noting that the shrinking profit margins make it difficult to sustain a café business. “You really have to love this work to do it because there are far easier ways to make money,” he said, underscoring the dedication required to operate in today’s challenging economic environment.

As the debate surrounding the VAT cut continues, many small business owners like Jonathan Barr are left grappling with the implications of government policies that may not fully account for their unique challenges.