Health food stores could close if Government goes ahead with hike in VAT

Health stores across the country are at risk of closing unless the zero VAT rate on food supplements is maintained, small business association Isme warned on Monday.

From March 1st, the Revenue Commissioners is set to apply the 23 per cent VAT rate to all food supplements, including vitamins, minerals, fish oils, and probiotics. Currently, while the standard rate of VAT applies to food supplements, vitamins, minerals and fish-oil supplements have been zero-rated since the introduction of the tax in November 1972. However, there have been concerns that the zero rate has been inappropriately applied, which is why Government is moving to a standard rate across the sector.

Ahead of this imminent move to a 23 per cent standard rate, the health food industry has warned that doing this will have a detrimental effect on many SMEs, and wants the increase in VAT deferred.

Neil McDonnell, chief executive with Isme, warned that the impact of the move to a full rate of VAT will be “catastrophic” for these businesses.

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“Retail prices will unnecessarily rise, and small businesses will struggle to absorb or pass on the costs. The Minister needs to defer the decision until an impact study (which he called for in November) is completed or to legislate for a 0 per cent rate of VAT,” he said.

Garrett McCabe of Health Matters, a chain of health stores which employs 30 people and has an outlet on Dublin’s Grafton Street, said that the increase in VAT will have “a huge impact” on the affordability of products that have significant health benefits, adding that this could lead to job losses and closures for some stores in turn leading to a loss of revenue for the Government.

“It will also drive people online to purchase products from outside the State, again leading to a loss of revenue to the exchequer,” he said.