Hospitality industry calls for temporary VAT cut to prevent job losses

The Association of Hotels, Restaurants and Similar (AHRESP) said on Thursday that the “temporary lowering of VAT on food and beverage services can prevent the growing loss of thousands of jobs,” according to a statement.

“Given the dramatic impact that the pandemic has had on the sectors represented by AHRESP, the association has been proposing since the beginning of the crisis the temporary application of reduced VAT on food and beverage services”.

The association believes that this initiative can “directly and universally strengthen the cash flow of companies and revitalise one of the economic activities most penalised by the pandemic”.

“If implemented in Portugal, the lower VAT would also halt the increase in unemployment of thousands of people in these sectors”.

According to data released by Statistics Portugal (INE), “in the second quarter of 2021, the HORECA channel [hotels, restaurants and cafes] lost 32,400 jobs compared to the same period in 2020, when the crisis was already being intensely felt” in the sectors.

According to the association, this level of unemployment, “which could have been avoided, could still be stemmed if the temporary application of the reduced VAT rate is implemented”.

The association recalled that last year it presented a study with international consultancy PwC, which concluded “that the temporary lowering of VAT would prevent the closure of 10,000 companies and the destruction of 46,000 jobs”, but this study “predicted a 31.1% drop in turnover between 2019 and 2020, the Government’s official data showed a 41% drop”.

“Lowering VAT in our economic activities has been a measure implemented in several countries around the world, in fact putting our country in a position of a competitive disadvantage as a tourist destination,” ensures AHRESP.

“With the discussion of the State Budget for 2022 [OE2022] approaching, AHRESP called on parliamentary groups to put on their agenda the discussion and defence of reducing VAT on food and beverage services to the reduced rate (6% on the mainland, 5% in Madeira and 4% in the Azores”.

The association has been defending this proposal since the beginning of the pandemic, which is enshrined in its plan “Facing the pandemic – Guaranteeing survival”, sent to the Government in mid-July, with 10 measures to compensate the tourist accommodation and catering sector for the effects of the pandemic, including strengthening the Apoiar programme, a new simplified lay-off and credit and tax moratoria.