VAT has always played a significant role in economic affairs of any country. First and foremost it is one of the most efficient sources of governmental revenue¸ providing funds for the government which are subsequently invested into various other economic enterprises. On the other hand¸ firms carrying out an economic activity consider VAT as an administrative cost which in some cases may lead to a cashflow advantage but overall it does not cascade within the productive processes yet it makes the final product to the consumer more expensive.

These past few years have been labeled as record years for tourism in Malta¸ with a record-breaking number of tourists visiting the islands. This success in numbers overshadowed the negative effect due to the increase in VAT charged on accommodation in 2011. One must ask the question what would have happened had there been no record arrivals?

To better understand this phenomenon¸ PKF prepared the detailed report on VAT. The study argues what can be the consequences on elasticity of demand given that the government reverses the 40% increase in VAT rate and reverts to changing the lower rate of 5%.

Below first page of the report!

Full study will be published soon¸ we will keep you posted!

For more information¸ please contact:

Ms. Tiziana Gauci at tgauci@pkfmalta.com