The Portuguese government last week presented to parliamentary groups its report evaluating the impact of the 23% VAT rate imposed on food and beverage activities within the restaurant sector.
The controversial tax hike has yielded the State €350 million over two years since it was increased from 13% in 2011 to its current level of 23% – a turnaround for the treasury of 140%.
In 2011, VAT receipts from the restaurant sector numbered €250 million. After the higher rate was introduced the following year, that rate increased to €520 million. By the end of this year, the government forecasts a total of €600 million in receipts, more than €350 million over 2011.
An inter-ministerial work group created in April to evaluate the “specific economic and financial costs to hotels, food and beverage operations and similar entities” drew up the report, which will be available for public scrutiny on the government’s official website. The offices of the secretariats of state for Culture, Fiscal Affairs and Tourism, and the deputy minister for Health, Solidarity, Employment and Social Security authored the report.
Over and above the 140% increase in VAT receipts, the government is claiming that more robust and far reaching “tax efficiency” is the reason behind the boost in figures, adding that there are more restaurants declaring and paying tax to the authorities after last January’s invoicing reforms, where all commercial transactions require an obligatory invoice even when not requested by the customer.
However, despite its findings, the report does not outline a time frame on whether VAT will be lowered.
A decision on this will only be made during the State Budget in 2014, which will be presented to parliament in the middle of October, revealed minister for the economy António Pires de Lima, who as a former businessman in the drinks sector has always advocated a lowering of the VAT rate.
The industry’s association, the Associação da Hotelaria, Restauração e Similares de Portugal (AHRESP), has been demanding the lowering of the current VAT rate, which it says has resulted in the closure of restaurants and associated companies. These closures, it adds, have led to a deficit in the public purse of €942 million between 2012 and 2013.
The question of the VAT rate levied on restaurants is due to be raised by the PS in parliament during the first week of October. The party’s António José Seguro has already described the hike as a “colossal blunder”.
“The little revenue that Pedro Passos Coelho is receiving due to the increase in VAT will be lost as restaurants close their doors and employees are left without a job,” he told Público newspaper.
His argument is that despite the 140% growth in funds collected by the State, the weight of VAT from overall restaurant receipts is not very significant.
In 2011, when the rate stood at 13%, food and beverage activity contributed 1.9% of the total of €13.051 billion. The increase to 23% saw that figure rise to 4.1%, but within the context of a decrease in the VAT tax revenue, in 2012 this figure dropped 2% to €12.794 billion, with almost €520 million generated from restaurants.
