Hotel protests continue

  • 2009-07-01
  • By Nathan Greenhalgh

LIGHTS OUT: Struggling Lithuanian hotels and restaurants continue to fight against the hikes to VAT, recently staging a blackout in protest.

VILNIUS - If you notice the power going out in your Vilnius hotel room, it's no accident.
The Lithuanian Hotel and Restaurant Association staged its second blackout June 29 from 10 p.m. to midnight to protest a VAT increase that it claims is putting lodging facilities out of business.
Over 230 hotels, guest houses and restaurants participated in the power cut, the association said.
 "There's been a decrease of tourism. The amount went back to 2006 levels, but the taxes are 2009, so this discrepancy is killing hotels," Evalda Siskauskiene, president of the Lithuanian Hotel and Restaurant Association, told The Baltic Times.
Government statistics show a 26 percent drop in occupancy rates from March 2008 to March 2009. According to Siskauskiene, the drop in occupancy along with the VAT has reduced hotels' profit margin by as much as 35 percent.
She said the Value Added Tax (VAT) tax hike on hotel room purchases from 5 percent to 19 percent, implemented as part of the Lithuanian government's anti-crisis plan at the beginning of the year, couldn't have come at a worse time.

The hotel industry is already suffering from the lack of direct flights to the country after the bankruptcy of national airline flyLAL in January and the worldwide economic downturn, she said.
Over the first five months of 2009, Lithuanian airports served 32 percent fewer passengers than during the same period the year before, according to the country's Department of Statistics.
Although the Ministry of Transport is working to renew direct flights with different airlines, six months after flyLAL suspended its flights Vilnius International Airport has only 14 direct flights 's none of which are to large European capitals like Paris, Berlin and Rome.

Siskauskiene also rails against the government's decision to cut the budget for marketing the country and the Vilnius European Capital of Culture project.
"On this world map there is no good image of Lithuania at all," Siskauskiene said. "There's no money for marketing, no direct flights and increased taxes. The prime minister is saying that VAT does not influence tourism at all, but all these things together, they are just killing us."
Despite the numerous Capital of Culture events, tourism to Vilnius in the first quarter of 2009 was down 21 percent from last year, according to the Department of Statistics.

The government has denied that it is punishing hotels and explained that it is merely rescinding a discounted rate. The prime minister's office declined to say whether the blackout protests would affect tax policy.
"Well, I can't say really, I think that's for the coalition to agree," Mykolas Majauskas, an adviser to the prime minister, told TBT.
"We have to be careful… our deficit is very large and still we have a goal to enter the eurozone by 2012."

In addition to seeking eurozone accession, the Lithuanian government is also keen to avoid having its credit rating lowered or being forced to seek IMF funds like its northerly neighbor Latvia.
The Lithuanian parliament will debate lowering the VAT on hotel room transactions back to 5 percent during its upcoming July budget session. However, the hotel and restaurant association isn't satisfied yet that its voice has been heard. Another blackout is planned for July 5 from 10 p.m. to 1 a.m. the following morning.

Siskauskiene predicts that about 20 percent of the country's lodging facilities, especially those in the coastal resort town of Palanga, will be driven out of business if the VAT is not lowered.