NEWS | Wednesday, 27 February 2008

Only Brussels can give green light to reduced VAT rate on restaurants

David Darmanin

The promise made by the two major political parties to reduce VAT on restaurants can only be implemented if government is given the green light by the EU Commission.
Restaurateurs feel discriminated by the fact that restaurants that form part of a hotel charge VAT at five per cent while stand-alone restaurants have to carry a much higher 18 per cent VAT rate.
But any promise to reduce the VAT rate can only come to fruition if Brussels is convinced of Malta’s case.
Speaking to Business Today, Malta Hotels and Restaurants Association (MHRA) Chief Executive George Schembri said : “For the application of lower-rated VAT on certain services, one requires the green light from the EU. Of course, if there had to be a blanket reduction on VAT rates for restaurants, the MHRA would welcome it. We have been lobbying on this through Hotreck, our parent organisation, and we also have Maltese Ministers working on it. Unfortunately there isn’t consensus among the 27 countries on the matter. Last year, Copenhagen had carried out a study on the possibility of applying the VAT low-rate to labour-intensive services, including restaurants. Unfortunately, there was disagreement on this.”

Resounding Alfred Sant’s reaction to the last national budget, Labour’s Tourism spokesperson Evarist Bartolo said: “What the PN is offering is too little, too late. While negotiating with the EU, the PN made a mistake in never bringing up this issue. Besides, the four other member states acceding with Malta negotiated a top rate of 15%. If we were to do the same, pushing for a reduction to 5% on certain labour-intensive services would seem more realistic.”
Asked to specify what would a Labour government do to convince Brussels on the issue, Bartolo said that the party was proposing a coalition of forces with those EU member states where tourism is important.
“In collaboration with countries like Spain, Cyprus, Greece, Italy, Hungary and the Czech Republic, we need to make tourism a higher priority on the European agenda. Of course, this will not be easy. We need to work hard at it. We can’t simply declare such a proposition and let it happen on its own. I haven’t seen enough energetic effort from government in this regard,” Bartolo insisted.
On his part, Parliamentary Secretary Tonio Fenech said the Nationalist Party is promising a discussion of harmonisation of reduced rates since there is a discrepancy between different countries.
“It needs to be noted that whereas reduced VAT rates in some other countries are set at 10% or 7.5%, Malta’s low rate stands at 5%. We are actively pushing for the reduced rate to be applied to stand-alone restaurants, since they too, form part of our tourism product. After the Copenhagen report, the commission asked the different countries to submit reports outlining the sectors in which low rate in labour-intensive services needs to be applied. We are also applying a policy of equal treatment. This means that we are pushing for the application of the same concessions given to other countries for Malta, as we can block the package with our vote. Discussions on this issue are still in the early days, but nonetheless, we are stating our position in our electoral manifesto.”