Sector reacts in shock; “tourism may be growing, but restaurant business ain’t”
A think tank created by the government has come up with the bright idea of increasing VAT on the beleaguered restaurant sector, from the current 13% to 23%.
At a point where hundreds of thousands of tourists are clogging supermarkets, buying food to eat in their rental apartments and villas, Portugal’s restaurant association has reacted in shock, stressing that data showing tourism riding high does not translate into restaurants raking in a summer fortune. In fact, the situation is quite the opposite. Any increase in taxation in the order suggested could, quite simply, see many outlets serving their last meals.
Ana Jacinto, secretary general of AHRESP (the association of hotels, restaurants and similar) explains to TSF Rádio that the sector is still struggling to recover from the effects of the pandemic. Costs have increased across the board (including rents) while custom, outside the most popular historic centres of towns and cities, has plummeted.
After 13 years in which restaurants have been on a fiscal roller coaster (see below) a new tax hike “would provoke the closure of hundreds of establishments” and consequent loss of thousands of jobs.
Jacinto recalled the ‘13 years of VAT instability’: up till December 2011, VAT was always charged at 13% on food and drinks in restaurants. Then, in 2012, it was increased to 23%, where it stayed until 2016. In 2016, the VAT on drinks was kept at 23%, but it reduced on food (to 13%) – and when this happened, the sector created another 50,000 jobs in two years, which, in turn, will have benefited the state with IRS income tax, and IRC business tax payments.
Ana Jacinto adds that a thriving restaurant sector benefits service providers, producers (“many of them local”), and promotes wine and gastronomy, which are linked to the country’s tourist ‘attractions’.
On this basis, certainly in the opinion of AHRESP and its members, an increase in VAT is to be avoided at all costs.
So why has the ‘the Technical Unit for the Evaluation of Tax and Customs Policies’ suggested it? According to media reports, the unit states “there would be an increase in tax revenue with VAT at 23% and considers that the current VAT rate of 13% mainly benefits high-income families”.
For a government that pledges to reduce taxation across the board, this ‘bright idea’ really doesn’t look that bright.
AHRESP has taken refuge in the fact that this proposal “goes against the European trend: Spain, France and Italy apply a 10% VAT rate to restaurants, and Greece applies 13%. These countries recognise the role of restaurants as an economic driver and anchor of social and territorial cohesion. We cannot go in the opposite direction and lose even more competitiveness in Portugal as a destination”, says Ana Jacinto.
Thus, AHRESP reaffirms its total “willingness to engage in dialogue with policy makers”. However, it insists that a further increase in VAT to 23% would be a mistake with serious economic, social and territorial impacts.
“The restaurant sector needs stability, confidence and conditions to invest, innovate and value its workers, while continuing to be one of the main drivers of the economy”, says the association.
Source material: AHRESP/ TSF Rádio
