Finance Ministry brushes off MHRA request for VAT reduction
Karl Stagno-Navarra
Statistics collected by the Ministry of Finance have revealed that increases in prices by hotels and restaurants during June have impacted the general rate of inflation by 18.64%.
The report – prepared by Permanent Secretary Alfred Camilleri – was presented to all MCESD partners a few days ago and also to the PL national conference on inflation.
The registered 18.64% increase in prices by hotels and restaurants, has impacted the general rate of 4.7%, making Malta the highest amongst the Eurozone countries.
The revelation comes as the Malta Hotels and Restaurants Association (MHRA) is in discussion with government in a bid have the VAT in restaurants reduced as an incentive for more consumer disposable cash to counter the current recession.
But as Finance Minister Tonio Fenech warned that any such reduction will not be expected before the next Budget, he also added that before implementing such a decision, he wants to be more than convinced that any reduction in VAT will ultimately benefit the consumer.
Besides this approach, Fenech also warned that reducing VAT on restaurants would mean that government would stand to lose €35 million in revenue, which must be collected from elsewhere.
“Would it be reasonably just to transfer €35 million in some form on tax onto the general citizen?” he asked last Saturday during the PL’s national conference on inflation... only to be countered by Labour Leader Joseph Muscat, who insisted that government must be “courageous,” and show flexibility in his positions, and not simply conduct a balance sheet exercise.
Joseph Muscat added that government must “learn to trust” the business sectors, and heed their advice on the benefits of reducing VAT on certain services in a bid to stimulate the economy.
As the discussions continue, the finance ministry statistics show how the hotels and restaurants sector impacted on the general rate of inflation last June.
The highest increase was registered in the main courses on meals out in restaurants with 14.4%; starters 3.2%; pizza served in fast foods 5.4%; burgers served in fast food 9.3%; cappuccino served in fast food 7.5%; soft drinks per glass 7.8%; local beer served 9.7%; whisky served by tot 9.3%; accomodation services 2.2%.
Contacted by MaltaToday, MHRA chief executive George Schembri explained that the Association has long been in contact with the National Statistics Office, insisting on a change in methodology of data gathering.
While indicating that the June figures reflect the seasonality of the product, the general increase in food prices are obviously reflected in the pricing of menus.
According to Schembri, the NSO restaurant sample is far too small to have a general picture on the restaurants and hotel industry.
“Out of 1,500 registered members, the NSO only surveys between seven and 20 establishments, and that definitely does not give a correct picture,” he said.
On the MHRA request for a reduction in VAT rate in restaurants, George Schembri expressed his association’s conviction that such an initiative would certainly be beneficial to motivate consumers to spend and generate jobs.
He also stressed that the initiative would also see a commitment by the establishments to lower their prices accordingly, while the MHRA would initiate a campaign similar to the Euro changeover FAIR scheme, by which establishments would display their “honest price” participation.
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