Portugal’s Finances minister to push for higher VAT in hospitality

Portugal’s Minister of Finances, Joaquim Miranda Sarmento is to ask parliament to present ideas for jacking up VAT in the hospitality sector.

Joaquim Miranda Sarmento had voiced his opposition to the VAT reduction in the restaurant sector implemented by the previous Socialist government in 2016, and challenged Parliament to put forward a proposal to reverse this measure.

In line with recent criticisms from the International Monetary Fund (IMF), the Finances Minister argues that the intermediate rate of 13% primarily benefits higher-income families who can afford to regularly dine out, and is therefore unjustified.

Regarding the Youth Income Tax, he stated that it is “a political choice,” in response to the IMF which also questions the wisdom and equity of the measure.

“A big mistake” was how Sarmento described the “highly populist” decision by the Socialist government in 2016 to lower the VAT rate in the restaurant sector from 23% to 13%, especially “at a time when the sector was rapidly expanding.”

The criticisms were again voice at the Budget, Finance and Public Administration Committee (COFAP) meeting held on Wednesday which agreed with the minister that the measures were no longer suitable.

The cost to the treasury of the measure is €1Bn per year which was highlighted by MP Patrícia Gonçalves, (Livre party), who also asked why the minister why he hadn’t reversed the legislation.

Regarding VAT on restaurants, the government can count on 96 votes in favour of ending the subsidies, but to get a majority in parliament the government needs to garner 116 votes,” the minister stated, referring to the MPs from the PSD and CDS-PP benches who would vote to scrap the lower VAT rate.

Therefore, Livre has the challenge of convincing the other parties to vote to reverse the preferential VAT measure.

Source: Jornal Ecónomico; Credits: Lusa.