Chamber president laments absence of lower VAT rate for tourism, hospitality sectors

The failure of the government to announce a lower VAT rate for the hospitality industry in last Monday’s budget speech was a major disappointment, the president of the Malta Chamber has claimed.

Marisa Xuereb told BusinessToday that the Chamber recognised the challenging fiscal position in which the budget was formulated, but felt the it did not effectively address measures aimed at the recovery of sectors worst hit by COVID-19, such as tourism-related segments.

“There was a deliberate effort in the budget not to support specific sectors but to present more generic measures that would affect more sectors and people,” she said. “We definitely expected more measures affecting the tourism and hospitality sectors, because although they are starting to report solid recovery numbers, much still needs to be done.”

Xuereb said the Chamber had been expecting the government to announce a reduction in VAT for the tourism sector, a measure the Chamber - like other bodies - had recommended to the government in order to prop up the sector which had been badly affected by the pandemic.

The Chamber president said she was also disappointed by the rather vague references in the budget speech to digitalisation incentives for the private sector.

But she welcomed many measures announced in the budget and said that in the prevailing economic climate in which operational costs are increasing at a fast pace for all business operators, the government took the decision not to place any further fiscal burdens or costs on the private sector.

“This includes the introduction of a new mechanism which is completely independent from the existing Cost of Living Adjustment (COLA) framework to assist vulnerable families, whose cost will be borne by Government rather than being passed onto the private sector,” she said. “This is a positive step in order not to allow an inflationary spiral across the board.”

She said that a number of proposals put forward by the Chamber had been taken up by the government.

These included schemes to incentivise productive work and shift works as well as reduced tax rates for part-time and overtime work, zero tax on pensionable income for those in employment beyond retirement age, and zero tax on the re-investment of profits for business operators.

Xuereb also welcomed the strong emphasis on green investments in terms of mobility and construction as well as in favour of heritage buildings and UCA properties.

Measures for better planning through the introduction of an aesthetics policy and comprehensive development, assistance for companies to offer training to their employees, more funding support to help commercialise technological products, and incentives for businesses investing in innovation would prove positive for the Chamber’s members, Xuereb said.

“We must also note that the myriad of social measures aimed at pensioners and other vulnerable groups are positive as it is felt that these cohorts retain their purchasing power in an inflationary economy,” she said.

Xuereb said that for next year the government was forecasting the highest increase in revenue to originate from VAT receipts with estimates higher than the 2019 VAT income. This assumes continued growth in consumption and rigorous enforcement of VAT dues as well as the collection of deferred VAT payments.

“The Malta Chamber fully supports the Government’s renewed commitment towards fiscal morality,” she said. “The fact of the matter is that when you have someone paying less VAT than they should, others would probably be paying more to make up for the shortfall.”

At the end of the day, everyone must pay their dues, she said.