Proposed VAT rise for restaurants could lead to tax evasion

Portugal’s restaurateurs have slammed the government’s decision to hike VAT in the sector by 10 percentage points from next year, a measure they say will strangle businesses and lead to more tax evasion.

In a joint statement sent to the Algarve Resident this week, the Portuguese association of hotels, restaurants and tourism APHORT and the association of hoteliers and related businesses in the Algarve AIHSA say they are “extremely concerned” by the VAT increase proposed in the 2012 State Budget and feel let down by the government.

“The restaurant sector has been abandoned by the government while forced to introduce extreme measures,” say the associations.

Portugal’s restaurant industry, a major income and employment generator, will be charging VAT at 23% next year instead of the current 13%.

“Despite our best efforts to alert the government about the damaging effects this measure will have on the economy, it decided to ignore us,” said the statement.

“Regrettably, several people will lose their jobs as the restaurant sector will have to undergo major restructuring to adapt to this new reality.”

The associations believe staff cutbacks will be needed at an initial stage to soften the blow of the impact such a tax rise would have on consumers.

Other scenarios pointed out by APHORT and AIHSA resulting from the VAT increase include the closure of several businesses and a greater incentive for people to evade tax and engage in parallel economies.