A disappointed secretary general of Portugal’s association for the hotel and restaurant sector said the board will convene a special meeting to answer the government’s insistence that VAT at 23% on meals in a sector that has nearly halved in size is somehow a good thing.
José Manuel Esteves said that the biggest surprise in yesterday’s government announcement in the 2014 budget proposal was that the government did not follow the advice of its own inter-ministerial working group and the European Commission, which both concluded that the reduced rate is an ‘economic stimulus’ and preferable in a sector that employs tens of thousands of workers, many of whom now are living life in the dole. Esteves blamed the rise in VAT, in force since January 2012, for the massive loss of jobs and business closures.
There were angry reactions to the news that the 23% rate is to be kept, “We are amazed, we are disappointed, we are outraged and above all disgusted. This revelation requires the AHRESP’s national advisory board for a special meeting in which we will analyze the situation and decide on the appropriate forms of protest, because it is absolutely immoral for the future of restaurants and tourism, our culinary culture is being destroyed," said Esteves.
This decision was based purely on the estimated loss of between €130 million and €178 million to the exchequer if VAT was dropped back to 13%, a figure insisted on by the Finance Minister, but not taking into account the cost of more long term people on the dole, unable to find work in an economy that has over 17% of its workforce sitting idle.
António Pires de Lima, the new Minster for the Economy had broadly hinted that the VAT rate would drop, and who before becoming minster had said the higher rate was foolish and wrong, was slapped down in cabinet talks as the beancounters won the argument.
On October 10th the Prime Minister attributed the difficulties experienced by restaurateurs, not to the increase in VAT from 13% to 23%, but to the fact that the Portuguese had now "less money to eat out."
António Pires de Lima, another newcomer with a fresh approach to problem solving, soon dragged down by the reality of politics. The lesson perhaps learned that in Portuguese politics is if you have an opinion, do not tell the public.
