VAT on restaurants ‘simply not sustainable,’ says Chef Sean Gravina

Earlier this month, the Nationalist Party (PN) renewed its push for a lower VAT rate on catering, proposing that it be brought down from 18 per cent to seven per cent.

During a pre-budget meeting with the Association of Catering Establishments (ACE), Opposition Leader Alex Borg remarked that the catering industry “currently requires support to remain sustainable.”

It was against this backdrop that local chef patron of Crust Bistro and Bar, Sean Gravina, weighed in on the matter, arguing that Malta’s current 18 per cent VAT rate is “simply not sustainable in our industry.”

In a detailed Facebook post, Mr Gravina said that Malta should follow other European countries in revising VAT rates for the hospitality industry, noting that governments across Europe have recognised that “the catering sector has been hit harder than most.”

He pointed to Germany’s decision to permanently reduce VAT on restaurant and catering services to seven per cent from 2026, Ireland’s cut from 13.5 to 9 per cent next year, and France and Spain’s existing 10 per cent VAT rate on restaurant meals.

“These decisions weren’t made overnight,” Mr Gravina wrote, explaining that such measures were introduced after “years of inflation, rising labour costs, higher utility bills and shrinking margins.” He added that restaurants and cafés, which employ thousands and “keep city centres alive,” were being taxed beyond what their reality could handle.

According to Mr Gravina, lowering VAT would ease pressure on operators, allowing businesses to operate more transparently and sustainably. “By easing the pressure through a lower VAT rate, these countries created a system that rewards transparency, keeps prices stable for customers and allows small businesses to breathe,” he said.

He further clarified that he supports a VAT reduction tied to stronger fiscal transparency. “I’m completely in favour of reducing VAT and operating through a fully live POS system. It’s only fair. A realistic rate combined with full transparency would give the catering industry the breathing space it needs to keep evolving and contributing positively to Malta’s economy.”

Mr Gravina argued that a lower VAT rate would not necessarily mean a loss of revenue for the government. “Sometimes less tax doesn’t mean less income. It means a fairer and cleaner system where everyone wins – business owners, employees, and the government itself.”

He also addressed the concern that lowering VAT would not lead to cheaper menu prices. “Some might ask, ‘If VAT goes down, will prices actually drop?’ The truth is, once the rate is fair, competition will do the rest,” he wrote. “It only takes a few restaurants to adjust their prices, and suddenly the market responds. That’s how real economies work – not through control, but through balance.”

However, his post sparked a lively debate among industry observers and the public. Some agreed with Mr Gravina’s reasoning but questioned whether the system would work in practice.

One commentator noted, “Whilst I might agree with you in theory, I ask, how many restaurants actually issue the fiscal receipt? Most of them are pocketing the 18 per cent.”

Another argued that lower VAT could unintentionally support weaker operators, saying, “The problem is oversupply, while purchasing power is decreasing. There are already options of different restaurants, offering different prices, and different quality. One is free to choose. The reduction of VAT will actually keep the bad ones in the market for longer.”

Others highlighted concerns about pricing and quality, observing that “our prices are competing with London prices but the quality of food and service does not compare.”

The issue of VAT reform has long been debated within Malta’s catering sector, with operators frequently citing high costs and tight profit margins as major challenges. At the same time, authorities have faced calls for stronger enforcement of fiscal receipts and compliance standards across the industry.