Carol Nolan warns of rising insolvencies, urges 9% VAT cut

Minister, I welcome the debate that we are having here today on this very important matter. Clearly, there is a need to rectify the deficits in law with respect to insolvencies and the protections offered to employees. Indeed, the need is becoming increasingly urgent. We know from reporting on this matter by Credit Connect in January that business insolvencies in Ireland hit their highest level in six years. This was based on research conducted by PwC. That report also specifically highlighted the fact that insolvencies increased by 16%, although they came in below expectations as the fourth quarter saw a drop-off in company collapses. That said, the total figure for 2024 was 852, which was, as noted below PwC's forecast, that insolvencies would breach the 900 mark last year. Most alarmingly, however, the report found that the retail and hospitality sectors accounted for 40% of all insolvencies. This collapse and unfolding of such businesses is something that I have been highlighting for some time now with respect to my own constituency of Offaly. In fact, last year I engaged with the then Minister for Finance, Michael McGrath, urging him to adopt maximum flexibility with respect to 1,530 businesses in what was then the Leash Offaly constituency, who had liabilities of £23 million warehoused as part of the tax debt warehousing scheme that was introduced for businesses following the pandemic. I pointed out at the time that there were 755 businesses in Offaly with tax debts of €11 million, while in Leash there were 775 businesses with £12 million in debts currently being warehoused. To my mind, this presented a clear and undeniable case for allowing businesses increased latitude around repayments, giving on the ongoing nightmare of closure announcements that were falling like confetti when it came to restaurants and cafes and the hospitality sector. This problem has by no means disappeared. Indeed, given the heightened volatility around tariffs and the EU response to the US, we are probably facing into a period of rapid growth in insolvencies. On the issue of the impact on hospitality, I would also like to point out to you Minister that the statement issued by the Restaurants Association of Ireland earlier this month found that 150 restaurants closed in the first quarter of 2025 due to soaring business costs. This data also revealed the mounting financial pressures facing restaurants and hospitality businesses right across this state. According to RAI, the pressure on the sector continues to result in closures, with 65 per cent of respondents reporting a decline in financial performance in 2024 compared to the previous years. Business owners identified wage increases and escalating operating costs as the most pressing challenges, and with many restaurants forced to reduce staff, raise menu prices and seriously question their long-term viability. The survey reveals that payroll costs now account for 39 per cent of turnover. This is a significant increase from just under 32 per cent in 2022. Food costs have also surged, rising from 28 per cent to over 34 per cent of turnover, while insurance and utility bills have climbed by 32.89 per cent and 25.81 per cent respectively over the same period. Employment trends reflect the strain, with full-time staff levels dropping by 10 per cent and part-time roles by 7 per cent since 2022. Minister, I accept that the bill we have here before us is definitely a step in the right direction, but my main point here today is that our first priority should be about putting structures and supports in place, be that through the tax or VAT code to prevent further insolvencies. I do hope that the VAT will be reduced for restaurants to the 9 per cent and also for hair salons who are also affected. Workers need access to their rightful earned wages if a business suffers from insolvency. No one could disagree with that as a fundamental principle. And yes, we need to ensure far more robust protections in line with the Supreme Court ruling in December 2018, that Article 2 of the 2008 EU Directive was not correctly transposed. But we have to do more in terms of reducing the massive tax and VAT debt that far too many businesses are labouring under and in some cases collapsing under. This is something that we can control. We should respond with all the latitude and constructive engagement that we can when it comes to achieving the goal of creating an environment in which local and regional businesses cannot just survive, but in which they contrive and in which jobs are protected. Because if employers aren't protected and businesses aren't protected, then obviously it leads to job losses. And I'm particularly concerned about that in Offaly, where we have seen far too many small businesses, particularly restaurants and cafes, close their doors in recent times. And I hope that more supports will be given in the forthcoming budget. And indeed, I'm calling for that here today, that the VAT rate be reduced to 9 per cent for our restaurants, cafes and indeed our hair salons as well. is day day night days day