Restaurants pay just €4,500 a year in corporate income tax - finance minister

The average restaurant pays just €4,500 a year in corporate income tax, less tax than many citizens, finance minister Clyde Caruana said on Tuesday.

Caruana was responding to questions during a Times of Malta business breakfast just days ahead of budget day on Monday.

Restaurateurs have been pushing for the government to slash their VAT rate from 18% to seven per cent for years, with PN echoing the call earlier this month.

However, Caruana gave the idea short shrift on Tuesday, saying the measure would cost the country €80 million.

Caruana told the audience, which included lobbyists, business groups and diplomats, that he finds the move “very difficult to justify,” given how little tax on their profits restaurants currently pay.

“When you look at corporate tax paid per restaurant, the average per restaurant pays about €4,500 per year” Caruana said.

“So you and I probably pay more tax than the average restaurant,” he told interviewer Herman Grech.

The proposal to lower VAT rates for restaurants first appeared as part of a set of pre-budget proposals put forward by the Association of Catering Establishments (ACE) ahead of the 2023 budget, with the association pointing to its own studies which showed that restaurants barely made a profit.

ACE had proposed cutting the VAT rate to seven per cent while connecting restaurants’ point of sales devices to the tax department, allowing the government to keep tabs on taxes paid in real time.

The move would be a win-win for everyone, the association had argued.

Earlier this year, a study commissioned by ACE found that although tourists believe restaurants provide good value for money, most locals say they are too expensive.