46,000 jobs ‘could be saved’ if government temporarily reduces IVA for Portugal’s hotels and restaurants

46,000 jobs could be saved if the Portuguese government agrees to temporarily reduce IVA payable by the hotel and restaurant sector.

So says a study commissioned by hoteliers association AHRESP.

Compiled by consultants PwC, the maths appears very clear: if IVA was brought down to 6% (from the current 13), overheads would be reduced by 732 million, allowing the sector to “maintain 35,000 – 46.000 jobs”.

There’s only one ‘hitch’: despite the State Budget for 2021 having a strong ‘social component’, it does not allow for this kind of measure.

Says AHRESP, other countries like Germany and UK have reduced their equivalent of IVA during the pandemic – Germany from 19% to 5% to the end of this year, rising to 7% till next June; UK from 20% to 5% (neither including alcoholic drinks). 

If such a measure applied to the sector in Portugal, roughly 76.000 businesses “living through a moment of economic asphyxia” could be given vital breathing space. Indeed PwC suggests an IVA reduction could actually stop the ‘contagion’ of business failures spreading from the hospitality sector to ‘other areas of the Portuguese economy’.

Thus the plan now is for AHRESP to press its case as the budget is ‘discussed’ in its ‘speciality’. This of course all depends on it passing in its ‘generality’, which still appears to be in some doubt (click here).

In the Algarve this weekend, President Marcelo stressed the need for ‘continuity’ and ‘stability’ – an environment in which politicians are not consistently haggling over details: “What I see in Portugal today is that people are looking at things from day-to-day”, he told reporters. “If we want to change Portugal we have to plan long-term”.

In Vila do Bispo yesterday, the Head of State also stressed that he was not against increasing Portugal’s deficit if it meant reinforcing the country’s SNS health service.

To this end he will be meeting this week with “various personalities in the health service” as well as with those in the economic and social sectors.

He stressed that balance has to be found “between concern for life and health without bringing a radical halt to the Portuguese economy and society.”

It’s perhaps the first ray of ‘hope’ in what has been an increasingly depressing political narrative since the country entered a new State of Calamity last Thursday.

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