Cafes and Restaurants Complain about VAT Increase

Total Croatia News

Regardless of record number of tourists coming to Croatia, cafe and restaurant owners say they might go bankrupt.

Tourist pre-season in Istria is in full swing, and a large increase in the numbers of guests is expected for Easter holidays when around 60,000 tourists will come to Istria. But, with beautiful weather coming, temperatures are not the only thing which is on the rise. Although cafe and restaurant owners say that the reason for price increase is higher VAT which was introduced on 1 January, some of them took advantage of the opportunity to raise their prices even more than that, reports Večernji List on March 30, 2017.

This year, the VAT rate increased from 13 to 25 percent for catering services, the decision which the owners as expected met with hostility. Prices of coffee have increased by a kuna or two, so espresso mostly costs eight kuna, while the price of a large macchiato is now 12 kuna.

However, many cafes have increased their prices in excess of the VAT increase. One cafe owner said that the price increase was larger due to the fact that their suppliers had also increased their prices. “I do not know how we manage to survive with the current prices, and I am not sure whether we will survive the next tourist season”, she said, complaining about high costs.

“Now the price of our coffee is approximately similar to Italy, although other beverages are still considerably cheaper. You cannot buy a beer in any European city for less than 4 or 5 euros. And they are in better position than us because their purchase price of coffee is lower and they have lower VAT than us”, said the owner of a cafe which will raise prices prior to Easter.

The owner of the Ulysses cafe in Pula Denis Bimbašić fears that he might have to dismiss one or two waiters due to the higher VAT rate. “We have not raised our prices yet, but we will have to do it because I will otherwise have to reduce the number of employees. We are already late”, said Bimbašić.

It is interesting that, despite another record tourist season coming, the owners do not expect higher consumption. “Consumption will not be large in restaurants and taverns, since guests will go instead to supermarkets which offer meals. It would be good for the local government to try to shorten the opening times of large shopping centres who stay open until 11 pm. There is no such thing in other countries. A tourist will rather go buy an old roast chicken and a case of beer in a supermarket and eat and drink that, because it is cheaper than eating in restaurants that will now have to raise prices”, said Dušan Černjul, the owner of Vela Nera restaurant in Šišan near Pula.

He added that the increase in VAT was not 12 to 13 percent, but actually was 100 percent. “We now pay the VAT rate twice as high as before, and that is a big expense. Some owners will pay 100,000 kuna more, and some even a million kuna more. The government said it would instead reduce the non-tax levies, but that cannot be more than 10,000 kuna per month in savings. This VAT will bury us”, said Černjul.

Some owners found a way how to avoid paying VAT. They registered their businesses to newly-founded companies, which do not have to pay VAT during the first year of operations. However, Černjul said that larger restaurants or hotels cannot do that. “That is a short-lived solution. Some people are doing it, but only those with smaller establishments. But, what about next year? Will they transfer the ownership to their sisters, brothers, mothers? We are where we are”, concluded Černjul.


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