Hoteliers are fuming about the Budget’s VAT increase on accommodation, accusing the Finance Minister of breaching a verbal agreement stipulating they should be given an 18-month period to plan for such hikes.
“We already entered into contracts for next year. Prices are already being advertised. We cannot just change the prices now,” the president of the Malta Hotels and Restaurants Association, George Micallef said yesterday.
This meant the VAT increase would fall on hoteliers not tourists, at a precarious time when they were already trying to cope with other expenses such as the higher energy tariffs. The measure would threaten jobs, reduce competitiveness and could end up costing hoteliers some €3.6 million, Mr Micallef said.
Talks with the government are already under way to “discuss this problem” and, as a negotiating tool, the MHRA is quantifying the number of contracts already signed for next year on the basis of the current five per cent VAT rate.
Finance Minister Tonio Fenech said it was “pretty clear” from discussions “way back in summer” that an increase in VAT was on the cards if the MHRA’s other proposals were not feasible.
“We’ve been discussing this for two years, so they knew they had to buffer for it,” Mr Fenech said, adamant this measure could not be delayed any further, referring to the postponement of the bed tax proposed two years ago.
He added the money raised would help fund the Malta Tourism Authority, which worked to bring more tourists to the island.
While the government “never closes doors to discussions”, Mr Fenech stressed that any alternative scheme would have to be funded by the money that would otherwise be given to the MTA.
The VAT increase from five per cent to seven per cent is planned to be introduced on January 1.
Addressing a press conference in the afternoon, Mr Micallef denied the VAT increase was “pretty clear” and said the measure was only mentioned last Friday, during a meeting of the Malta Council for Economic and Social Development.
He said the lack of consultation went contrary to the longstanding agreement between the government and the MHRA on how increases in VAT should be introduced.
The MHRA said the government could achieve its deficit aims without this measure, with one hotelier suggesting the government should just do what it did last year. It should invest another €4 million to bring another 100,000 tourists and “make the cake bigger” for everyone.
“We hope common sense will prevail,” Mr Micallef said, even though other MHRA members at the press conference did not seem so optimistic, with former president Kevin DeCesare saying it would be easier to win the Super Five lottery.
The VAT increase was also slammed by the Gozo Tourism Association, which said Gozo’s industry was already “fragile” and not enjoying the same increased arrivals as Malta. However, it praised the Budget measure it had proposed where €500,000 were specifically allocated for marketing Gozo as a distinct destination.
Mr Fenech says Malta has the seventh lowest accommodation tax in the EU but the MHRA claims Maltese hoteliers are among the most burdened with other costs.