Hotels threaten protest over VAT

  • 2009-05-28
  • By Adam Mullett

EMPTY ROOMS: Lithuanian hotels and restaurants are planning protest action over planned tax hikes. Soaring vacancy rates and the economic downturn are crippling the industry.

VILNIUS -More than 100 Lithuanian hotels and restaurants plan to switch off the lights and music during two conferences scheduled in Vilnius to protest the tax hikes for hotels and restaurants, which are expected to kill off 30 percent of hotels by the end of the year.

"We are protesting because of the high Value Added Tax (VAT) that went from 5 to 19 percent. We can't compete with other European countries. Twenty countries from 27 [EU member states] have lower VAT than 10 percent. Our government doesn't treat it as an export which is usually tax free," Evalda Siskauskiene, president of the Lithuanian Hotel and Restaurant Asssociation (LVRA) told TBT.

"We can't compete with Poland and now Latvia has realized their error and will change the tax from 21 percent. Also, Estonia. We can't compete with our nearest neighbors."
Hoteliers and restaurateurs are demanding that the 19 percent VAT tax be reduced to less than ten, or they will carry out the protest.

"We don't want to hurt our guests so we will do a warning protest. On June 11 there will be a big investment forum and on June 29 there will be a European Parliament summer assembly for defense. We didn't choose these dates accidentally," Siskauskiene said.
The protest will see lights turned off for one hour between 11 p.m. and 12 p.m. Guests will be informed of the protests and the reasons beforehand, the LRVA president said.
However, Prime Minister Andrius Kubilius said taxes would remain unchanged.
Earlier, Kubilius' adviser for economic issues, Mykolas Majauskas told TBT the taxes were necessary.

"[About] the initial decision to abolish the VAT exemption 's the VAT exemptions are a loss for the government. We have very little space to maneuver and it is not something the government could afford," Majauskas said.
"It is not an increase, but an abolition of the exemption. Hotels are not having a bad time because of the VAT, but because of the whole downturn 's people travel less. This is the external environment," he said.


The LVRA said occupancy rates had fallen dramatically and that business owners had had to lay off around 20 percent of their staff across the country.
The association claims that during the first five months of 2009, occupancy of hotels decreased by 25 percent and turnover of restaurants suffered a decline of about 40 percent.

According to data from Statistics Lithuania, in the first quarter of 2009, accommodation establishments had 21.9 percent less guests than in the same period of 2008.
The statistics showed that there had been a decline in foreign tourists equal to 10.5 percent.
The drop coincides with the collapse of the country's airline FlyLAL and the almost complete withdrawal of the Latvian airline airBaltic from the country.

A secondary demand of the LVRA is that the government develop a coherent strategy on tourism and focus on finding a replacement for FlyLAL.
At the time of printing, Vilnius only had 12 direct connections to other capital cities in Europe leaving it one of the most isolated capitals in Europe.