Research by the Association of Portuguese Hotels and Caterers (AHRESP) has this week stated that around 75 percent of companies are ready to hire workers as soon as VAT on catering services is reduced.
The study, available on AHRESP’s official website, was done by interviewing 700 companies across mainland Portugal and its island regions, and revealed that 53,000 workers in the catering industry lost their jobs in the first half of 2015 alone, with many restaurants, bars and cafés being forced to close their doors to the public.
According to Pedro Carvalho, AHRESP Director of Research, Planning and Studies, it is clear that “thousands of jobs will be created” once VAT is brought back down to 13 percent after four years of being at 23 percent.
Carvalho added that 77 percent of all businesses said they would hire additional staff should VAT be reduced, with 60 percent overall saying they have had to sack workers in the past few years as a direct result of the VAT hike in 2012.
A further 79.3 percent said they would renovate their facilities as soon as VAT came down, while 40.8 percent said they would invest in new products.
AHRESP has also presented case studies of how the increase had had a negative effect on the food and beverage industry.
The association further claimed that there was a “clear difference in competitiveness between Portugal and [the rest of] the European Union” where tax was concerned.
“We’re the country with the highest VAT rate for this sector”, it said, adding that tourism “is one of the most important engines [that has] contributed most to the economy” and that a cut in the VAT rate would therefore boost the economy.
“We’re all in agreement that companies who have survived the crisis need a real sign of improvement, such as a tax cut, so that they can continue to fulfill their obligations, while also maintaining and creating jobs,” the association said.
According to details of the macro-economic plan drawn up last year before the elections by Socialist Party economists and financial advisors, the country’s accounts will be able to support a cut in VAT from its current figure of 23 percent to 13 percent.
The Socialist-sponsored working group estimated that this reduction will have a dent in the nation’s coffers of around 300 million euros during the course of 2016 with a direct impact of 210 million euros on the public deficit.
But the report argues that a cut in the flat VAT rate would see fewer establishments dodging taxes, many of whom do so to keep their doors open, which in turn would soften the blow on the state’s depleted coffers.
Economists also believe that with more disposable income available, restaurants will be more inclined to hire young and low qualified workers who they say were the first to suffer as a consequence of the VAT hike in 2012 imposed by the previous government.
But two weeks into the new year, the Socialists remain tight-lipped as to when this cut will come into effect.
Not only did they make it part of their election manifesto, but it was a key element in brokering the post-election leftist alliance with the Left Bloc and the Communists that enabled the Socialists to come into power.
With no word coming out of Parliament as to when the VAT cut will come into effect, if at all, it has been left to the Earth Party (MPT) to challenge the delay in this key electoral promise becoming a reality.
“António Costa promised and said this measure would come into force at the start of the year. We are here now and therefore it is imperative that this promise is kept”, the MPT said in a statement sent out on Wednesday, concluding that the new government needs to be wary of becoming one of many words and little action.