The Malta Hotels and Restaurants Association is holding urgent talks with the government after the Finance Minister's announcement yesterday that VAT on hotel stays and other tourist accommodation will rise to 7% from January 1 from the current 5%.

MHRA president George Micallef said this afternoon that while the measure was expected to rake in over €5 million for the government, it would cost hoteliers some €3.6 million in view of signed contracts with operators which cannot be changed.

The decision, he warned, could have an impact on jobs.

Mr Micallef insisted that the government should honour a long-standing verbal agreement which laid down that any changes to VAT would be preceded by an 18-month notice period, to enable the industry to make allowances for it.

Mr Micallef also questioned the need for the VAT increase in the first place, saying the government could achieve its deficit reduction target without hiking VAT.

He pointed out that tourist arrivals in the first eight months of this year had risen by 100,000 on the strength of a €4 million increase in government spending on the industry, and the country as a whole was benefiting from this.

Finance Minister Tonio Fenech in comments to timesofmalta.com insisted that the VAT increase had to be brought into force on January 1 to cover increased government spending on tourism. He said the governemnt had been negotiating some form of charge with the MHRA for the past two years, but the door for negotiation remained open.

See story at

http://www.timesofmalta.com/articles/view/20101026/local/fenech-defends-vat-increase-on-hotel-stays