The government has allocated €1.5 million to help hoteliers who had signed agreements with tour operators before VAT on tourist accomodation was raised in the last Budget.

The VAT rate was raised from 5% to 7%.

Finance Minister Tonio Fenech and Parliamentary Secretary for Tourism Mario de Marco said the fund had been set up after consultation with the stakeholders.

Mr Fenech said tourism had reached record levels last year thanks to investment by the government in product development, promotion and assistance to low-cost airlines. The funding allocation to the the Malta Tourism Authority had risen from €24.6 million in 2008 to €35 million last year.

The governemnt had initially planned to introduce a 50c per night bed tax to recover part of the outlay, but that was shelved in order to enable the tourism sector to weather the international economic crisis. In the last Budget, however, the governemnt raised VAT to 7%, which was still among the lowest among competing destinations.

Dr de Marco observed that tourist arrivals  in the first four months of this year totalled 351,955, an increase of 65,246 over the same period last year. Bed nights were up 16.1%, while tourist spending, at €249.4m, was up 16%.

The government, he said, would continue to focus on accessibility, effective promotion and product development. The government would also continue to encourage and help operators to invest in the product in order to remain competitive.