Issue link: https://maltatoday.uberflip.com/i/1260749
18.06.2020 6 OPINION I n their quest to recoup losses faced during the three-month lockdown, operators let a sigh of relief when Hon Robert Abela, the prime minister an- nounced an easing of regulations to allow restaurants to open under certain condi- tions. e announcement of the fourth mini budget is welcome. is is offering in- ter alia a cash injection of €34 million by way of €100 vouchers (five coupons of €20 each distributed free to resi- dents over 16 years of age) to be spent in catering, hotels and certain shops. is announcement has caught the imagination of a number of operators such that the Malta Tourism Authori- ty promptly reported to the press that it had received some 860 calls mostly from those within the hospitality sec- tor. Last month, a number of restauran- teurs called to ask about various as- pects of the protocols and what they need to do to become fully compliant in the shortest possible timeframe. e Chamber of Commerce insisted that businesses should be given a clear and safe direction on the way forward in a "responsible and structured manner". In its own words, the Chamber re- marked that "At the same time the country ought to continue to give due weight to the nation's economic needs as well as the physical and mental health of our people". In plain words, the conditions imposed for restaurants and cafeterias to open varies for indoor and outside catering. For indoor dining, there has to be a reduction in covers such that the max- imum number of diners will be one for every four square meter with a mini- mum distance between seatings of two meters. is condition will reduce risks re- garding transmission of infection but of course reduces the number of cov- ers by half. Tables have to be limited to groups of not more than six diners from the same household. Other conditions include disinfection of tables and chairs after each use with menu and wine lists replaced with sin- gle-use sheets. For outdoor dining (which is the pre- ferred option) again, same conditions for distance and family groups apply and no smoking is allowed. No doubt, restaurateurs typically queried details of the protocols and what they need to do to comply with inspections by MTA to certify the 2100 eateries that accepted the conditions to start operations. Certainly, state TV was lauding this as a triumph for common sense hop- ing that the chance to recoup part of the income forfeited in the past three months, will encourage more restau- rant owners to accept to restart oper- ations. MTA hoped this will encourage all restaurants and cafeterias to join in the scheme. One should wait to see how profita- ble is the new scheme given that most probably due to reduced covers, the operational costs will be higher, while most expect the spending power of some diners to be subdued. e injection of cash vouchers may see the whole country throwing cau- tion to the wind and indulge in cele- brating "Imnarja" traditional feast by dining out. Certainly, the heavily re- duced number of patrons (especially as no tourists) may render the operation non-viable unless menu prices reflect a hefty markup. One may argue that having a soft opening is better than total closure of the business since chefs and the sup- port staff can at least become active. No study, has been announced by the authorities to guide restaurant owners whether it pays to accept the condi- tions for a partial opening and guide them on the cost of health insurance against the incidence of risks of infec- tion from catering staff or diners. On a positive note, Malta Enterprise stated that in a spirit of support for the hospitality sector it will continue to pay the wage supplement (albeit at a reduced rate) to next September. is is welcome news, but as far as the vi- ability of the industry is concerned it is a stop-gap solution and unless seat availability improves then it is certain- ly a critical time for restaurant owners. Why does a simple meal of a gourmet pizza, a glass of foreign wine and an es- presso cost more than €20? A major issue is the cost of food which has gone up since the outbreak of Covid 19. Quoting, Eurostat Malta experienced the highest monthly in- crease in inflation across the EU last April. Inflation went up by 2.9% in April when compared to March. Government preferred an immediate solution so rather than reduce tax, it opted to issue cash vouchers (a stop- gap measure). A fair solution is to achieve parity in vat rates by reducing them to match those charged in other Med countries. is article explains how taxation of catering establishments (whether it is fast food or silver service) can be improved by lowering vat to 7%. One hopes it will result in cheaper meals. is will match the lower rates charged by our competitors in the Med. It is no secret to note Luxembourg charges only 3% on food. Another nov- elty is Greece. At the peak of the Greek financial crisis, in September 2011, the VAT rate for non-alcoholic restaurant sales increased from 13% to 23%, yet following pressure from the sector, government was persuaded to reduce it to 13% in August 2013 for a two- year experimental basis during which it transpired that more taxes were col- lected. Catering in all-inclusive hotels in Malta is charged at a composite vat rate of 7%. In a nutshell, restaurants located in prime sites are facing in- creasing rents, now linked to a drastic reduction in the seating capacity as stated earlier and increased food costs. ese combined factors push owners to either hike up menus as the alter- native to remain tax compliant results in losses after the supplement stops. Some face failure as when the airport and ports reopen there will not be any stampede of cash-laden tourists. e spectre of rising rents and licens- es makes one doubt if the landlord is earning more than the catering oper- ator who risks so much time and en- ergy to meet all the health and safety requirements. Now due to Covid 19 regulations they are facing reduced revenue but no re- duction in fixed overheads. A reduc- tion in vat on catering will encourage more patronage during these difficult times and reduce the cost of living - which is silently spiraling out of con- trol. Cashing in the €20 free vouchers George Mangion George Mangion is a senior partner of an audit and consultancy firm, and has over 25 years experience in accounting, taxation, financial and consultancy services. His efforts have seen PKF being instrumental in establishing many companies in Malta and ensured PKF become one of the foremost professional financial service providers on the Island