Issue link: https://maltatoday.uberflip.com/i/1472631
8 NEWS 7.7.2022 R estaurants and cafes are weath- ering a new storm at the start of the tourist season, as the exodus of foreign workers during the pandemic le them understaffed and vulnerable to poaching of trained staff who move to other sectors. Regrettably, the government did not care much for this human resource at the beginning of the pandemic when faced with the exodus of foreign work- ers which otherwise had to be factored in hiking up the cost of a wage supple- ment. Two years ago, we politely encour- aged the foreign cohort (not EU na- tionals) to return home. Now, there is a scarcity of trained restaurant workers, hotel staff and general helping hands in retail sectors, a fact which is pushing wages up. What can be done for this sector which now faces stiff competi- tion for workers? e obvious solution is to open the doors for quality for- eign workers and speed up the mangle of bureaucracy that stifled their work permit applications at Identity Malta. e Times of Malta mentions a well- known restaurant owner who during the pandemic kept all staff on board with zero income and now is having his staff poached by other outlets. Is the real problem that the sector is not registering sufficient profits and can- not sustain paying higher wages? Surely, apart from the dubious policy of dishing out cash vouchers, an al- ternative solution is to reduce tax on eating. is is a battle cry which has been taken up by MHRA, ACE, PKF, PN, and other associations for the past four years. Malta levies the highest VAT rate when compared to neighbouring countries. As the tourists trickle back in, they will be surprised to find such heavy taxation when dining out. A re- duction in VAT could put the sector on a level playing field with other Medi- terranean countries, rendering the in- dustry more competitive. is extra revenue could be used to provide workers with higher wages and in the short term improve food quality and diner service. Young people who choose a career in catering complain that being paid €5 to €6 an hour is too little for their hard work and dedica- tion. e industry cannot afford to in- crease wages, given the losses suffered under the pandemic (partially offset by furlough schemes). Obviously, a reduction of 10% in VAT would need to be reflected in lower menu prices and that is perhaps one of the main stumbling blocks as the au- thorities do not have enough resourc- es to carry out point of sale checks. Although theoretically, it should not prove back-breaking for MTA officers to randomly monitor menu prices. As can be expected, the situation is even more dire for business owners in Valletta. Will the government consider biting the bullet and help the catering and leisure sector by lowering VAT? Other European countries have al- ready reduced VAT to 5% (UK & Ger- many). e Netherlands charges 6% on restaurants (excluding alcoholic bever- ages), take away food; bars, cafes and night clubs. And Luxembourg charges the lowest rate of 3% on food but 17% on alcoholic beverages. Malta, on the other hand, charges a full rate of 18% on restaurant business albeit a lower rate of 7% on hotel ac- commodation, which include all-in- clusive food and drink packages. Some may disagree with the idea of reducing taxation and will argue that any mar- ginal drop in the menu price list will not make much of a difference since the current trend is for low-income travellers who prefer to book Airbnb accommodation. Here, food cost is not a primary concern. Others argue that a reform is necessary to arrest rampant under-declaration of VAT. e proven maxim is that state revene will go up when tax is lowered. Anoth- er variation on the theme is to cap the VAT payable according to the type of restaurant: high class, medium or fast- food outlets. Anything that reduces the cost of dining will be a godsend to the sector and will help check the rising inflation. In the retail sector, many village shop owners are complaining at the unfair competition they face from the megas- tores which can negotiate for cheaper merchanside when buying in bulk. Small business say any advantages they had with being in the heart of the community and offering a personalised service are overshadowed by the unfair playing field they face. Consider how the rates charged at top hotels in Malta are still competitive but at their present low level, they cannot sustain the requisite quality so the image of a "sun, sea and cheap beer" island remains. is image has been exacerbated by the sponsoring of low- cost airlines. e mantra "go for quality not quan- tity" has also been the battle cry of ecologists who oppose the idea of 2.8 million airline passengers plus another one million cruise liner arrivals which up to 2019 were clogging our roads and contributing to unprecedented air and noise pollution. Now, with more EU funds at our dis- posal, we should take a step back re- consider a permanent remedy to the faux pass that over the years blinded us to go for quantity over quality. e solution is a challenging one, calling for surgery not palliative care. It needs a tourism minister with nerves of steel and the full support of the cabinet for the long haul. A tale of summer fun, vanishing workers and tax George Mangion George Mangion is a senior partner at PKF, an audit and consultancy firm, and has over 25 years' experience in accounting, taxation, financial and consultancy services. His efforts have made PKF instrumental in establishing many companies in Malta and established PKF as a leading professional financial service provider on the Island