Food fight – are restaurants carrying the can for government-induced inflation?
Raphael Vassallo The Finance Ministry’s recently published statistics have indicated price increases of 18.64% in restaurants, contributing in turn to the general inflation rate which stood at 4.7% in June – by far the highest among Eurozone countries.
But the restaurant industry is having none of it, insisting that its prices have remained stable in recent months; and that if there is any inflationary pressure at all, it is coming from government-induced costs such as price hikes in water, electricity, gas and other essential services.
Representatives of the hotels and restaurants sector have also strongly hinted that in presenting its statistics, the finance ministry may have been seeking to minimise the government’s contribution to national inflation rate, by pinning the blame on their industry instead.
But even industry spokespersons concede that Maltese restaurants are currently overpriced – albeit for very different reasons than suggested by the ministry report.
MHRA rebuts Alex Bonello is the manager of the Black Pearl in Ta’ Xbiex, and also the main MHRA spokesman for the restaurant sector. He argues the ministry’s statistics simply do not correspond with the reality as experienced by restaurateurs themselves.
“Research undertaken by MHRA indicates that restaurant prices have actually remained stable for the past six months. I can’t understand where they are getting their figures from, when they say that prices have gone up...”
According to Bonello, by pointing fingers at the restaurant industry, government is merely “kicking the ball back into the industry's court” for its own failure to control inflation.
But he admits Maltese restaurants are overpriced compared to their competitors in Europe – mainly, he argues, because of the higher VAT rate charged locally.
“MHRA is currently in discussion with government over the VAT rate on restaurants, which at 18% is too high compared with other markets. In other European destinations, VAT on restaurants has been reduced to 5%. Ours is therefore the highest in Europe... so by reducing the rate, we would be restoring a level playing field.”
Bonello also echoes restaurateurs’ complaints that unlike its European counterparts, the government of Malta has precipitated matters by pushing up prices of essential commodities.
“Added to the VAT issue are other government-induced costs, which even in times of recession tend to be 100% increases,” he said, with reference to recent price hikes in utilities and fuel.
Bonello further suggests that statistics collated earlier by the National Office of Statistics were flawed, because they put together both hotels and restaurants in the same category. “The Prime Minister last April referred to an apparent increase in prices registered by the NSO. On closer inspection it turned out that the increase was of 0.002% - and it was registered only in the hotels sector, not in restaurants at all.”
Bonello points out this sort of minimal hotel mark-up is seasonal and to be expected. “It’s quite normal for hotels to put up their prices in April, which represents the start of the high season; just as it is to be expected that prices will come down slightly in October.”
Expensive mistakes However, among food aficionados there are also those who also blame unscrupulous or unprofessional restaurateurs for jacking up their prices to unreasonable levels.
MaltaToday’s resident restaurant critic Mona Farrugia argues that consumers pay too much for the quality of what they actually get in return. “I think the demand for lower VAT is really a knee-jerk reaction by people who don’t want to confront the real issues, such as lack of investment in sourcing and training their staff,” she points out.
“Chinese food, or the Maltese approximation of it, is a classic case in point. A recent MaltaToday survey revealed that Chinese is the most popular cuisine in Malta. It is also the cheapest to produce, for a number of reasons...”
This, Mona argues, is the upshot of a widespread perception that the restaurant business is something of a “get rich quick” scheme for certain businessmen.
“Who suffers as a result? The restaurateurs who are genuinely trying to do right by their clients, who have a real love and passion for food: the ones who buy local produce, who invest in good chefs and training, who then put some effort into sourcing their products. Eventually, the person that suffers most is the customer who still has to pay good money for cheap stuff...”
Further inflating menu prices are entrepreneurs who know little about the restaurant profession – often making expensive mistakes whose cost is invariably passed on to the client.
“Many local restaurateurs simply don’t know how to buy ingredients. They end up paying far more then necessary for low quality. For instance, they buy fruit and vegetables from Sicily, when the local version is much more fragrant and produces better dishes. They buy meat from Argentina, and the client ends paying much more just for the transportation. If they bought closer to home the price would be cheaper and the quality often better. A case in point would be meat: there are excellent producers in Scotland and Ireland; do we need to go as far as Argentina?”
According to Mona, these and other issues will not be solved by simply lowering the 18% VAT rate on restaurants.
“Reducing VAT will only assuage the restaurateurs’ bank managers for a little while, then they’re back to where they started with unhappy, under-paid, under-trained staff, badly-sourced food, and no customers. We are not going to save restaurants by reducing VAT. The restaurants which will survive are the ones which have a good product to offer.”
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