Proposed VAT drop for restaurants and hotels will create jobs boom

A survey reveals that drop in VAT from 23% to 13% for the restaurant and hotel sector announced for January wil lead to a boom in staff hires.

More than two thirds of Portuguese restaurant and hotel companies are looking to recruit more staff when the VAT rate is reduced from 23% to 13% "in January" according to the Socialst Party promise. The survey was commissioned by the Association of Hotels and Restaurants of Portugal (AHRESP).

In late 2015, a survey of 700 companies was commissioned to understand the impact of the austerity VAT increase measure and to look at how companies will be acting when the rate reduces to its old level of 13% "in 2016" according to the Socialist manifesto promise.

"With VAT on food and drink services reducing to 13% in 2016, 77% of companies plan to create jobs," said the head of research at AHRESP, Pedro Carvalho.

Between 2012 and 2015, "with the brutal increase in the tax burden, nearly 60% of companies had to dismiss workers," a period that AHRESP calls "a perfect storm" for the industry.

Pedro Carvalho also reported that many companies also will be investing in their businesses whent the rate reduces, with 80% of respondents planning to remodel and 41% investing in new products.

"In addition, most respondents also intend to improve wages and working conditions," said Carvalho who pointed out the loss of 53,000 jobs in the first half of 2015 alone.

The overall impact of the VAT decrease is put at a €330 million drop in revenue to the State in 2016, according to Socialist party estimates, which will impact the national deficit by €210 million.

But Pedro Carvalho is confident that with more workers to be employed the financial and social benefits will soon work their way through the system to the benefit of all.

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