“High risk of bankruptcy” threatens 60% of hotels and restaurants

Portugal may have registered a groundbreaking year for tourism in 2014, but a European Commission (EC) report has highlighted the appalling state of the majority of the country’s hotels and restaurants as a result of their 23% IVA (VAT), stressing that 60% of them face a “high risk of bankruptcy”.

Pedro Carvalho from Portugal’s hotelier and restaurant association (AHRESP) explained there has been a “brutal increase of taxes” within the sector under this current government that companies simply could not risk passing on to their customers.

“Thus our margins and capital began being truly crushed,” he told online newspaper Dinheiro Vivo.

As the paper points out, the two industries employed 320,000 people in 2008. Last year that number had dropped to an all-time-low of 276,000.

In fact, 26,000 jobs were lost in 2014 – the year authorities declared to be Portugal’s “best tourism year ever”.

Since restaurants’ VAT rating was upped to 23%, AHRESP has been calling for its return to 13%.

Such a scenario seems unlikely, claims Dinheiro Vivo, as the measure contributed to a 140% increase in tax revenue between 2011 and 2013.

Carvalho counters that he doesn’t know how much longer companies will be able to survive.

“Never have these sectors had such low employment levels,” he affirmed, adding that the restaurant and hotel industries employ 6.1% and 1.6% of the country’s working population.