Restauranteurs seek reductions in VAT on meals

krinpit

According to the Irish Independent

President of the RAI Aidan MacManus says current tax rates mean the government makes five times the restaurant's net profit on an average meal.

Mr McManus said that of an average €100 bill consists of: €13 in VAT, €31 in staff costs, €31 in product cost, and €22 in overhead costs, leaving only €3 for the restaurant.

Seems like a very simplified version of events. Surely staff costs are spread across multiple meals. Ditto for overhead costs. Thoughts?

Captain Trips

krinpit wrote:

According to the Irish Independent


Seems like a very simplified version of events. Surely staff costs are spread across multiple meals. Ditto for overhead costs. Thoughts?

VAT isn't a "profit" for the government. How much profit do they want? I agree with your comment that staff costs are spread over multiple meals - otherwise the salaries are very high in restaurants. Overheads could be electricity/gas and so on, cleanign crockery but still that estimate seems high.

I would suspect that it's dubious, similar to the publicans wanting a reduction in VAT. Quite simply, they would rather the government take a hit not to *allow* them to make a profit but simply to make even *more* profit.

I would love to hear from any restauranteur (? the right word?) for a detailed breakdown.

antoinolachtnai

Actually, you can look at VAT as essentially a dividend to the government.

Profit is a more subjective subject than you might think. You need to make a profit to give a return on the time and money that has been invested in the business. Any capital-intensive business has to produce an operating profit to pay interest and a dividend to bankers and investors.

New restaurants are pretty capital-intensive, because of the cost of getting a lease assignment is often pretty high. Hygiene standards mean that the investment in kitchen equipment, etc. is pretty big.

The problem isn't just the raw profitability figure. The problem is that at such a low rate of profitability, it isn't very attractive to open new restaurants. This in turn is leading to a low level of competition in the sector.

I'm not saying those figures are really 'right' or 'typical'. Obviously, if the restauranteur managed to make a 1 percentage point saving in each of those areas, he'd be making much better money.

However, I think the figures look more-or-less right. You buy a steak for 3 euro, you sell it for 10. (Obviously a steak costs more, because of the dressings, etc.) It takes about 30 minutes of staff time to handle it, between preparing kitchen and dining room, cooking, serving, cleaning up and 'down' time when there isn't much going on in the restaurant.

Victor

*Whinge*

I wonder how many politicians will (or won't ) be gettign a free lunch between now and budget day.

€22 in overhead costs

Including large director's salaries & bonuses.

antoinolachtnai

Well, I assume they mean rent, heat, light, repairs, stationery, laundry by the 22 percent and it does sound a bit high. However, they may be factoring in debt repayments or interest in as well. Not exactly standard accounting, but it's not totally unreasonable.

Honestly, food isn't as profitable a business as people think. It can be profitable, but a lot of places just don't get the volume to make it churn money.

There is a lot of 'black', undeclared money in the system too, there's no point in denying. But on the other hand, restaurant managers are under pressure from some of their suppliers to pay for things in cash.