A recent meeting in Lisbon between representatives of the restaurant and hotel industries and the Troika was an opportunity to vent the frustrations about the high 23% VAT rate in the sectors.
AHRESP (the association for hotels, restaurants and similar businesses) alerted the Troika to the urgent need to reduce VAT, “the only chance restaurants have to survive the crisis” and ensure employment for “tens of thousands” of people.
The association supported its statements with various studies from independent consultancy companies, including PwC and Ernst & Young, revealing the “catastrophic effect” the 23% VAT rate is having.
During the meeting, it was discovered that the VAT rise for the restaurant and hotel sectors did not form part of the memorandum of understanding signed between the government and the Troika, and that the Portuguese powers-that-be are solely to blame for the measure.
Jobs lost
Citing the study conducted by Ernst & Young, AHRESP presented some interesting figures: if the government immediately reduced the VAT rate to 13% in the food and beverages sector, the balance between losses, amounting to an estimated €280 million until the end of the year, would be recovered through more employment and related taxes to the tune of €346 million, meaning a positive balance of €66 million for the state’s coffers while 30,000 jobs would be maintained.
The study also reveals that the VAT increase has so far helped destroy 25% of around 300,000 jobs in the sector, with predictions that this figure could rise to 40% by the end of the year.
AHRESP was due to meet with members of the PSD party this week to negotiate a VAT reduction.
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