The government’s decision to increase the VAT on hotel accommodation from 5% to 7% and the rise in the excise duty to be paid on alcohol and cigarettes are topics that have raised debate since the presentation of the Budget for 2011 last Monday.

As expected, the Malta Hotels and Restaurants Association has not been pleased with the idea that their clients will now have to pay more for their holiday. Likewise, alcohol producers and importers did not welcome the idea that their products will now be more expensive.

The MHRA has accused the government of not consulting with the association, saying that the 2% rise comes at the wrong time, since the tourism industry is still recovering from the recession that hit the world in recent times. Arrangements they have already made with tour operators with regard to costs for next year were not taken into consideration, the hoteliers are arguing. For its part, the government is insisting that the additional expenses are minimal and that the 2% rise will not stop tourists from visiting Malta.

Both arguments have their validity, as the MHRA rightly feels that at a time when the tourism industry is just re-emerging from the recession setback, such an increase could affect their business. They justify their claim by saying that a number of hotels will close down for the winter.

On the other hand, it must be pointed out that such a situation – hotels that close down for winter – is not extraordinary, as many take the opportunity of slower business to carry out refurbishment projects that cannot be done when the hotel is full.

The government’s line of thought that a 2% rise will not stop tourists from coming over, considering that Malta is still one of the cheapest destinations in the European Union, also holds water. It is, on the whole, a more reasonable prospect than adding VAT across the board and on all products and services, as other countries have done. People who afford holidays can usually afford to spend something more on their accommodation.

The transition period agreed to yesterday between the two sides was probably the best way forward, as contracts already entered into will not be affected by the rise.

Politically speaking, no government can ever be criticized for raising the price of alcohol and cigarettes – except of course by the people who are directly involved in the industry. The harmful effects of excessive alcohol and the unhealthy practice of smoking are “easy” justifications for any government.

When one considers the amount of expenses involved in treating people with ailments and illnesses that are caused by alcohol and cigarettes, any increase that could encourage people to kick their habit is most welcome. Of course, most smokers and drinkers will continue to smoke and drink anyway.

All in all, these two topics are being “debated” simply because they were the only measures that the government introduced in an otherwise run-of-the-mill budget that aims to bring the country’s deficit down. Considering that in other countries governments have felt the need to introduce much harsher austerity measures, we do not have so much to complain about.