Hoteliers who signed contracts with tour operators for next year may be offered a “one-off transition scheme” to better cope with the increase in VAT on tourism announced on Budget Day.
The Finance Ministry yesterday said it was “prepared to consider” a concession in cases where contracts were signed before the measure was announced on Monday.
The Malta Restaurants and Hotels Association has complained about the surprise announcement, accusing the Finance Minister of breaching a verbal agreement through which they should have been given an 18-month period to plan for such hikes.
Hotel operators have now been given until Monday at 2 p.m. to send signed contracts to the office of the Malta Tourism Authority’s CEO for consideration. The office will also be opened on Saturday and Sunday between 9 a.m. and 12 noon.
The contracts, which must be accompanied by an estimate of the number of tourists expected to be brought to Malta, would be treated with “utmost confidentiality”, the ministry added.
“At this stage, the government is simply gathering the necessary information to assess the magnitude of MHRA’s claims and will take decisions in due course,” a spokesman explained. When contacted, MHRA president George Micallef described the situation as “still volatile”, adding the government made it clear it was not willing to postpone the VAT increase beyond January 1.
Asked to calculate how much the “concession” would impact on the government’s projected €6 million income from this measure, Mr Micallef said: “Practically all our tour operator business is signed and that accounts for 60 per cent of our entire business.”
This means the government stands to lose some €3.6 million but when asked to confirm this, Mr Micallef said: “It doesn’t have to work exactly like that. We have not agreed on anything specific. We are prepared to sit down and talk. We have not discussed figures. We just presented our arguments.”
He added things still had to be refined and nothing was decided except that the government would meet MHRA after everything was quantified.
In his Budget speech, Finance Minister Tonio Fenech announced that VAT on collective accommodation was being raised from five per cent to seven per cent, sparking outrage among hoteliers who said they would have to foot the difference and this would exacerbate their difficulties.
But Mr Fenech argues the hoteliers should have known the measure was on the cards because similar proposals had been discussed for two years but had always being postponed.
Meanwhile, Labour Party’s Business Forum expressed concern over the move, saying the measure would undoubtedly hit the industry badly.
“The tourism industry should not become a milk cow in a bid to bolster government income when it is still recovering from the economic recession and facing stiffening international competition,” the forum said in its reaction to the Budget. This was even more so when national carrier Air Malta was facing very difficult times.
It said low-cost airlines gave the tourism industry a boost but could not be seen as a solution for all the sector’s problems. A long-term tourism strategy was needed.
The forum, set up earlier this year to help the party keep in touch with the business community, said that although the local igaming and financial services sectors were doing well, other sectors were finding it hard to attain acceptable levels of growth and pro-fitability.