I find myself in the unusual position of agreeing with Finance Minister Tonio Fenech and his reluctance to reduce the VAT rate for restaurants. Local hoteliers and restaurateurs are clamouring for the slashing of VAT from the 18 per cent they are currently obliged to collect from patrons.

They claim that it would lead to more disposable income, that it would act as a stimulus to the economy and that it would help them to retain current employment levels. This follows from the European Union's decision to allow member states to reduce VAT to 5.5 per cent in sectors such as the restaurant industry. France has gone ahead and authorised the reduction, after obtaining a commitment from the industry, that the price cuts would be passed on to customers.

Maltese restaurateurs want to follow suit. However, Fenech does not seem to be so eager to go down the French route. He said that if a reduction had to be made, it would be announced in the next budget and it would only come about if the government was guaranteed that the consumers would benefit.

Malta Hotels and Restaurants Association president Kevin Decesare said that the association was willing give an assurance that any reduction would translate into reduced restaurant prices for consumers. This would take place by the industry's participation in a scheme similar to the FAIR scheme when Malta switched to the euro. Consumers will know which restaurants would have pledged to reduce their prices. Those who did not participate in the scheme would be named and shamed.

I'm not convinced that this naming and shaming business will strike fear in the heart of all restaurateurs and café owners. Nor am I sure about the positive effects of the reduction in the VAT rate, on the economy.

Take the enforcement aspect to begin with. How are we to know that prices haven't increased before the tax rates are cut? Do people keep tabs on the prices of individual food items such as cappuccinos, croissants or smoothies? They might take note of the prices at their regular haunts but very few are neurotic enough to retain receipts prior to the tax cut, in order to be able to compare them to the ones issued after the tax cut.

If the system has to work well, it will require a lot of overseeing and enforcement - not something we are very good at. And what's to say that restaurateurs will not claim that they will be compelled to up prices, because of the expenses involved in the changeover? Will they wave their newly printed menus in our faces and factor in the costs as part of their mark-up? What about the man hours required to carry out the repricing and the recalculation of the pricing scheme? Will such costs be borne by restaurant owners or by diners? It's not cynicism which prompts me to ask these questions - merely an awareness of what has happened abroad in similar scenarios.

In Britain, for example, Gordon's Brown's government has reduced the VAT rate on served food from 17.5 per cent to 15 per cent - hoping, like we do, that this will encourage people to eat out more often and to spend more.

Although restaurateurs were not obliged to pass on the reduced costs to consumers, you'd have thought that they would have been willing to do so, to attract more custom. Instead, a good number of them chose not to so and to absorb the tax cut into their profit margins. Some of them - like Mike Gottlieb, owner of Christopher's restaurant in Covent Garden and The Enterprise in South Kensington - blamed the costs involved. Gottlieb said: "Most people I'm talking to are doing what I'm doing and leaving prices as they are."

Mr Gottlieb, who is also president of the Restaurant Association, added: "It's a huge amount of work in a short period of time to change all the prices. And at the busiest time of year. We just can't afford to have teams of people sorting it out."

In effect this meant that the restaurants were the only ones to benefit from the tax cut. The scheme was being utilised in the way that the Czech Minister of Finance, Miroslav Kalousek, who had led the discussions about the matter in the EU Council, said it would be.

He had stated that the intention was not to transfer restaurant services to the lower VAT rate so that the prices in restaurants would be lower "but to create a kind of cushion in the area of catering services that would help to keep employment in this sector". This may work as a temporary mitigation measure in these recession-prone times, but it will do little to entice diners to restaurants which do not provide very good value for money. Unfortunately - that's a reference to most of the restaurants on the Maltese islands.

Although I understand that the running costs of local restaurants are quite high and that they necessarily have to impose a decent mark-up, it does not excuse the shoddy service, unexciting food and nondescript surroundings which is the norm. I'd say that these factors are more to blame for diners' disenchantment with the local restaurant scene, rather than the VAT they have to pay for dining out.

cl.bon@nextgen.net.mt

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