Restaurant VAT at 23% raises more, forget about the job losses

Paul 25 November 2013

The VAT rate on restaurants and catering has had a ‘positive impact’ of €180 million, according to a delighted Secretary of State for Fiscal Affairs.

Paul Nuncio was speaking on the last day of debate on the 2014 state budget and accused the opposition socialists of using ‘wrong numbers’ in its analysis of the impact of the rise in VAT from 13% to 23% in 2012.

The socialists agree with research commissioned by the association of restaurateurs’ that concluded the impact of the VAT rise was a negative €850 million when factors such as mass business closures, subsequent dole payments, bankruptcy proceedings leading to unrecoverable taxes, and suicides were put into the equation.

“Contrary to the socialists who, in denial of the reality that the financial impact of this measure was not negative for the state, but was positive, based thrie arguments on erroneous estimates that have been circulating in the past two years," said the Secretary of State.

Paul Nuncio stated that "the objectives of fiscal consolidation were achieved despite leftist parties continuing to preach data that is not true."

When a tax rise puts half of the contributors out of business, yet raises marginally more than before, this is seen as a good thing by the current regime. The socialists argue that it is better to have more people gainfully employed, with the tax at a lower rate, as the social consequences of tens of thousands of restaurant workers losing their jobs is not helpful to society as a whole.

Comments

0 #3 Mark H 2013-11-27 23:46

Quoting Peter Booker:

We can take it as read that when the government does not refute a numerical argument with specific numbers of their own, they are either incompetent or lying.

Unfortunately, having worked with various governments for almost 30 years, I have never encountered any hidden "masterplan" or overarching reasons, mainly just staggering incompetence, short sightedness & self interest at many levels, not solely the political "overlords". Until you get a consensus of what you are all (politicians, civil servants & public) wanting to achieve, then you can never really make clear headway. It will be left to a variety of individual agendas to decide how this will pan out, rather than any coherent strategy.

0 #2 Peter Booker 2013-11-27 09:01

We can take it as read that when the government does not refute a numerical argument with specific numbers of their own, they are either incompetent or lying.

0 #1 Mark H 2013-11-25 23:27

We have the same problem in the UK, where business cases are limited to individual Departments, so that costs of unemployment benefits are not to be taken into account when calculating "savings", so there is a big "surprise" when benefits payments suddenly increase. Yes, there may be a marginal increase in VAT returns from the restaurant sector, but the impact of restaurant closures is not just on direct employees, but also the suppliers & other 3rd & 4th level businesses who see revenue reduction, and so reduced taxation. What is needed is a lighter taxation regime, allowing proliferation of more businesses, albeit operating on slim margins, but spreading employment further, with a ripple effect on other businesses in the area. Portugal has always been about "spreading the good", and suddenly trying to make it "efficient" by crude measures like this will ultimately prevent economic recovery, while damaging society irreparably.

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