Café Owner Faces Rising Costs Despite VAT Cut in Connemara

A café owner in Connemara has expressed skepticism about the impact of a forthcoming reduction in Value Added Tax (VAT) set to take effect in July 2026. According to Diarmuid Ó Mathúna, who runs An Pota, the VAT cut will not significantly ease the burden of rising operational costs that his business faces.

Ó Mathúna highlighted that while the government’s decision to lower VAT is welcomed, it is overshadowed by increases in baseline wage rates and pension contributions that will also be implemented in the upcoming budget. Based on his calculations, he anticipates only a modest saving of approximately €7,000 annually, while additional pension costs and wage hikes will amount to around €14,000.

“Unfortunately, we cannot pass the VAT cut on to our customers due to other rising costs,” Ó Mathúna stated. “It would be a worse situation overall.” He noted that while summer months bring a surge in business, activity tends to drop significantly after late August, complicating financial planning.

The staffing challenges faced by small businesses in the region are also prominent. Ó Mathúna remarked on the difficulty of attracting workers, particularly in a rural area reliant on seasonal tourism. “At times, I find myself working alone as a server, which highlights some of the challenges we face,” he explained.

The café owner also discussed cash flow issues that typically arise during the off-peak months of January and February, stating that An Pota does not see a substantial uptick in business until the Easter holidays. “We will be paying a higher VAT rate until July, which makes it tough, especially with the other rates not coming into effect for another four months,” he added.

According to data from Fáilte Ireland, the number of tourists visiting Ireland has declined, particularly affecting businesses in the Gaeltacht region. Ó Mathúna noted a noticeable decrease in visitors from the United States, attributing this trend to various international issues, including political tensions and rising costs of accommodation. “There are fewer Americans traveling here now, and we are seeing more tourists from France and Germany instead,” he said.

Despite the challenges, Ó Mathúna remains hopeful regarding the impact of the VAT reduction. “We welcome this measure, and we have been advocating for it for some time,” he commented. “There are exceptional circumstances now, and the challenges we face are greater than they were even during COVID-19. Prices are rising for everyone, and many places are closing because of it, so we are extremely grateful for this decision.”

He expressed a desire that the VAT cut will instill confidence in struggling businesses and help them stay afloat. “I hope this decision regarding the VAT will give a lifeline to businesses that are fighting to survive,” he concluded.

By sharing these insights, Ó Mathúna illustrates the complex interplay of economic factors affecting small businesses in rural Ireland, revealing that even welcomed changes like a VAT reduction may not be enough to offset the broader financial challenges they face.