ACE ‘concerned’ over minister’s statement on ruling out tax cuts

The Association for Catering Establishments has voiced its concern over the finance minister’s declaration in which he ruled out any tax cuts in the near future.

ACE said it was surprised that Clyde Caruana has he ruled out Value Added Tax cuts for the catering establishments industry as proposed by the association in the run up to the budget speech for 2024.

“Caruana claimed Malta had the second lowest VAT rate after Luxembourg, ignoring the fact that most EU countries have variable VAT rates for different criteria, particularly food in restaurants,” ACE said.

It said Malta has the sixth highest VAT rate on food in restaurants within the EU members states, super ceded only by Denmark (25%), Estonia, Slovakia (20%), Latvia and Lithuania (21%).

“The other local eateries in the remaining 21 member states, including Germany, Belgium, Austria, Finland, Sweden and the Netherlands all have lower VAT rates on food in their restaurants than those in Malta,” it said. “When comparing with our Mediterranean counterparts within the tourism industry, Malta ranks highest at 18% in contrast to Croatia 5%, France 6%, Cyprus 9%, Italy and Spain 10%, Portugal and Greece at 13%.”

The association said that in 2019, Greece slashed its VAT rate from 24% down to 13% to stimulate economic growth. This reduction had such a positive reaction that Greece retained this pre covid measure an additional two years.

“It was also ironic for the minister to advise local businesses to look outwards rather than inwards, when taking into consideration that foreign-owned restaurants investing in Malta are incentivized by falling under the 1/7’s tax bracket at 5%, while the Maltese entrepreneur investing in same business models must pay 35%,” ACE said.

ACE said it acknowledges and supports the energy subsidies which apply for all commercial industries. However, it underlined that global inflation has heavily impacted local eateries in contrast to the other Mediterranean counterparts. “Malta imports more than 70% of its food consumption while competing countries such as Italy, France, Spain, and Croatia import an average of not more than 10%.”

“ACE also praises the fact that Government has allocated a budget to overcome inflation and formed alliances with retailers to stabilize or even lower their selling prices, though ACE reminds the Minister of Finance that this same inflation has heavily impacted the restaurant industry as well, so the VAT reduction would be an appropriate measure in a very peculiar time for the industry.”