Minister all but rules out cuts

Reducing the 18 per cent VAT restaurants charged patrons would cost €32 million, a sum the country could ill-afford, Finance Minister Tonio Fenech said yesterday.

The money could be spent more effectively and invested in measures such as safeguarding employment, he said.

In March, EU finance ministers agreed to allow member states to reduce VAT to 5.5 per cent in sectors such as restaurants, as a way of stimulating the economy. The move was welcomed by Malta's private sector, which hoped a cut would materialise.

Mr Fenech had initially said the government would definitely not be cutting the VAT rate before the next budget and that it would only do so if consumers would benefit. Mr Fenech yesterday confirmed his stand: "The European Commission gave us the flexibility to reduce the VAT rate but the restaurant sector is not in a disastrous state. It does not mean some restaurants are not feeling the pinch but this is surely not because of the 18 per cent VAT rate".

The Malta Hotels and Restaurants Association has long been calling for a reduction in the VAT rate, saying this was badly needed to revive the sector.

"Such a cut on the VAT rate on restaurants is needed now; today. The economy is what it is and requires all the help it can get. We would like the VAT rate to be cut to five per cent, which is the rate for hotels in Malta," MHRA president Kevin DeCesare had said.