Thousands of jobs “could be saved” if government reduced IVA on food and drink

Thousands of jobs could be saved if the government reduced IVA payable on food and drink.

This is the case made by AHRESP, the Portuguese association representing the catering side of the hospitality sector.

In a communiqué, the association warns that employment in the industry is under ‘increasing attack’.

As it explains: “in the face of the dramatic impact that the Covid-19 pandemic has had on sectors represented by AHRESP, the association has proposed since the beginning of the crisis for the temporary application of a reduced rate of IVA”.

The government, to date, hasn’t taken this onboard.

But AHRESP is not giving up. Today the association stresses that such a step could “reinforce the income of businesses, directly and universally, and revitalise one of the economic activities most penalised by the pandemic situation.

“If implemented in Portugal, the reduction of IVA would stem the increase of unemployment for thousands of people”, says the communiqué, citing official data (from statistics institute INE) showing that hotels, cafés and restaurants lost a further 34,200 jobs in the first half of this year, compared to the January to June period of 2020 when the pandemic was already being felt “intensely”.

Indeed, this level of unemployment “could have been avoided” if the percentage of IVA applicable on food and drink had already been reduced.

AHRESP isn’t simply relying on its own ‘guesstimates’ for these assertions. It cites a study by international consultants PwC which concluded that “the temporary reduction of IVA would have stopped the closure of 10,000 hospitality businesses and the destruction of 46,000 jobs” in Portugal.

The only trouble with the study is that it predicted a fall of 31.1% in the volume of business of food and beverage companies between 2019 and 2020, when government figures have since revealed that the drop was 10% more (41%).

Another point is that other countries HAVE reduced their equivalent taxes for businesses worst affected by the crisis, which AHRESP believes leaves Portugal as a tourist destination at a further disadvantage.

The chips are down – and the government is getting close to discussing the 2022 State Budget: AHRESP wants to see IVA brought down to 6% on the mainland, 5% in Madeira and 4% in the Azores. It is currently on 13%.

The association recalls that at the beginning of this crisis it sent the government a 10-point plan showing how survival of the sector could be secured (click here).

natasha.donn@algarveresident.com