Several dozen hotel and restaurant owners and managers protested outside the Lithuanian government office in central Vilnius on September 27 over the government’s plans to end VAT exemptions for catering businesses.
Lower VAT rates were introduced to prop up the sector during the Covid-19 pandemic and would expire at the end of the year. The government has repeatedly said there are no plans to extend them.
Meanwhile, restaurant and hotel owners insist they are still hard-pressed by high energy prices. If the VAT relief is stopped, around half of the country’s catering businesses will go bankrupt in 2023, argues Evalda Siskauskiene, president of the Lithuanian Association of Hotels and Restaurants.
“Some 50% of the catering sector would definitely go bankrupt, because besides the drastic increase in energy costs, we also have 55 million euros in unpaid taxes and a shrinking inflation-hit clientele,” she said during the protest.
Gediminas Balnis, the owner of Amber Food, one of the largest restaurant and cafe groups in Lithuania that operates 65 restaurants with 1,200 employees, says the group may go bankrupt unless the VAT relief is extended.
“Apart from electricity, the costs of raw materials alone have risen by 30% this year, which is why we have raised our prices by 15%. So we are already lagging behind, and then the VAT and the increase in the minimum wage from the New Year are the last nails in our coffin,” Balnis said.
“Yes, we are big, but when 100 restaurants close in a month, there will probably be a bit of a shock for the population, because the whole group would go bankrupt. Nobody goes partly bankrupt,” he added.
Siskauskiene said earlier that 81 catering companies went bankrupt over the first six months of this year, which was more than in 2020-2021. There are currently more than 7,000 restaurants and cafes in Lithuania, employing more than 37,000 people, and another 14,000 work in hotels, according to the association.
Speaking earlier in the day, Prime Minister Ingrida Simonyte said the reduced 9% VAT rate for catering establishments would expire at the end of the year, stressing that this was the agreement and it must be respected.
The standard VAT rate in Lithuania is 21%. (LRT/Business World Magazine)