Consultant to analyse proposal on VAT cut for restaurants

An independent consultant is expected to analyse a proposal to reduce VAT on restaurants from 18 per cent to five per cent, a move that could potentially cost government €30 million in lost revenue.

The consultant was appointed by the government in agreement with the Malta Hotels and Restaurants Association to determine the proposal's effect on government finances and its wider economic impact.

Tourism Parliamentary Secretary Mario de Marco said the government had not completely ruled out adopting the proposal made by the MHRA but its implications had to be studied also in terms of its potential benefit or otherwise to the wider economy.

Interviewed on Radio 101 yesterday, Dr de Marco was not so upbeat about the proposal.

"On the one hand, the MHRA is asking me to increase the tourism authority's marketing budget and at the same time they want the government to cut VAT. From initial studies carried out by the Ministry of Finance reducing VAT to five per cent would mean a drop of €30 million in revenue," he said.

Dr de Marco cast doubt on whether the reduction in VAT would truly mean lower prices for restaurant patrons, pointing out that when levies were removed the price of wine in restaurants did not go down. Even so, he said, after discussions with the MHRA both sides decided to appoint a consultant to study the proposal in its entirety.

With the latest National Statistics Office figures indicating a July drop in tourists to the tune of nine per cent and a decline in bed nights of eight per cent, Dr de Marco found solace in the bad news afflicting competing countries.

The recession did leave a negative impact on the sector, he said, but considering the bigger declines in other countries things could have been worse.

Dr de Marco said it was very difficult to forecast whether the industry would shed jobs after the summer season. "The economic uncertainty means that people have increasingly resorted to late bookings, which makes it very difficult to make projections. There have been job losses and the sector has been very cautious in employing new staff, especially part-timers, to keep costs down, but overall we have not seen massive job cuts," he said.

The government launched a number of packages to help the industry. These varied from interest rate subsidy for loans to refurbish hotels to topping the marketing budgets of individual operators if they increased their marketing and advertisement. He said the government was committed to continue helping the sector weather the storm.

With reference to the latest controversy over the new cruise liner terminal at Boiler Wharf in Senglea, where illegal works were carried out by the Investments Ministry and which was the subject of a critical internal MTA report, Dr de Marco denied it was a case of the left hand not knowing what the right hand was doing.

The MTA report was compiled by a tourism zone officer for the Cottonera area and it did not have to come up to ministerial level.

"The criticism in the report concerns the environs outside Boiler Wharf such as lack of dustbins and other cosmetic issues. These are already being addressed," Dr de Marco said, insisting that the zone officer was doing her job.

Asked whether the inter-ministerial Cabinet committee on tourism was still functioning, Dr de Marco replied in the affirmative but avoided detail on the matter. Instead he spoke about inter-disciplinary committees at a lower level that brought various stakeholders together and which met on a regular basis to address particular issues pertaining to different tourism zones.

Touching briefly on the reform of the Malta Environment and Planning Authority, Dr de Marco, who the Prime Minister designated to oversee the actual reform, said work was being done to draft the necessary legislative changes to set the reform in motion. These changes would be ready by the end of September and the government would then present a Bill in Parliament.

He defended the reform and insisted that it sought to seek a balance between the often conflicting demands of environmentalists and developers.

ksansone@timesofmalta.com