Hoteliers to get partial VAT refund on accomodation

Hotels that had contractual arrangements in place when the government raised the VAT rate on accommodation will be refunded half of the increase, the government announced yesterday.

In the last Budget the government had pushed the VAT rate on accommodation up to seven from five per cent, a move criticised by hoteliers who had already entered into contractual obligations for 2011 at the old rate.

Finance Minister Tonio Fenech and Tourism Parliamentary Secretary Mario de Marco said an agreement was reached with the Malta Hotels and Restaurants Association for a refund that amounted to half of the increase although the government’s cost would be capped at €1.5 million. Mr Fenech said if the value of refundable VAT on contracts that were submitted with the Malta Tourism Authority was higher than the capping, hoteliers would receive their payment on a pro-rata basis.

MHRA president George Micallef, who was present for the press conference, said the agreement helped mitigate some of the financial pressure caused by the higher VAT rate.

“We wished it was better but it is good that some of the additional cost can now be recouped,” he said.

Mr Fenech defended the higher VAT rate, insisting that government had increased the budgetary allocation to the MTA over the past few years.

“The higher expenditure had to be partially recouped to make it sustainable. Although we in-creased the VAT rate to seven per cent it is still among the lowest in the EU,” Mr Fenech said.

According to Dr de Marco the World Travel Competitiveness Report showed Malta improved its competitiveness and advanced three places in the world ranking. He attributed this to improved accessibility and better human resources.

“The number of routes servicing Malta now stands at 75 and this also means the MTA needs more money to market the island,” Dr de Marco said.