HORA: VAT increase does not bring money to the budget, but bankruptcies and massive layoffs

Representatives of employers in the hospitality industry claim that increasing VAT from 11% to 21% in this area would practically mean bankruptcy for many companies, which will lead to massive layoffs, which will bring new pressure on the state budget in terms of unemployment benefits that the public budget should pay.

Radu Savopol, president of HORA, an employers' organization that brings together almost 200 companies with a consolidated turnover of over 3 billion euros annually, said yesterday during a press conference: "It is a difficult time for the hospitality industry, especially since the summer season has passed and the figures are not formidable. The government promised us a reanalysis of the figures in October. Unfortunately, they are not the most promising. Today in HoReCa we do not have a VAT of only 11%. 11% is only for food, the rest - alcoholic beverages, soft drinks and desserts are subject to a VAT of 21% and we were promised that if the figures decrease, we will switch to 21% VAT including food. We believe that it is a measure that will affect the sector even more, because the figures are not formidable. Many locations have closed, many are for sale and I think that everyone who accesses social media notices how many restaurants, bars, cafes or even hotels from the seaside are being put on the market. It would be a shame to destroy over 10 years of work in an industry that has grown even during the pandemic”.

The consequences of the VAT increase would be devastating for consumers and for market operators, said the HORA president, who specified that a 50 lei pizza could reach 70 lei, because the price will include all the price increases that come in the chain, including raw materials or energy, and the immediate effect will be a contraction comparable to that of the 2008-2009 financial crisis, when the hospitality industry, which counted between 30,000 and 35,000 units, suddenly dropped to approximately 25,000.

"Now I'm talking about bars, restaurants, pizzerias, including the village bodega. There are somewhere between 33,000-35,000 units. I think that between 2,000 and 3,000 locations have already closed and if the VAT increases or many more taxes appear, we will return to somewhere around 25,000. The trend is the same as in the previous crisis," Radu Savopol said.

The alarm signal is also supported by data analyzed by financial specialist Iancu Guda, which shows that although the hospitality sector's turnover increased in 2024 by 8.2% compared to the previous year, reaching 52.17 billion lei, the adjustment for inflation leaves a real increase of only 2.6%, while profitability dropped to only 8% in 2024, after being 12% in 2023 and 16% in 2022, and the workforce stood at approximately 185,000 employees, of which 123,000 in restaurants and bars, which means the risk of massive layoffs.

Restaurants are emptying, consumption is declining, and rising energy and fuel prices are contributing to additional pressure on the industry. In addition, the prospect of increased VAT has blocked investments and increased the number of listings for the sale of units.

According to a survey of operators, restaurant traffic has dropped between 40% and 50%, with some locations even seeing a 66% reduction in customers.

Radu Savopol, president of HORA, pointed out: "Maybe at the beginning of the summer we were more positive and thought that we would more easily digest the higher taxes and the VAT increase. Unfortunately, the summer came with negative figures and a very bad outlook for the autumn-winter 2025-2026. If those who lead us do not quickly look at the real figures in HoReCa, we will wake up with an industry effectively on the ground. If we also bring food to 21% VAT in HoReCa, I think it will be the end of the industry. You can't compete when another segment of the economy has 11% VAT, and in the restaurant the same product is taxed at 21%. What we are asking for is that the food served in restaurants has the same VAT as the purchase of raw materials necessary for its preparation. Why should there be this difference? Appreciated and supported hospitality is found in other civilized countries in Europe".

HORA's estimates are clear: the VAT increase would mean an increase of over 10% in consumer prices, a decrease of over 15% in turnover in the following year and massive layoffs, which would affect approximately 15% of the sector's workforce.

In this context, the organization calls on the Government to abandon any intention to increase VAT to 21%, to align the rate for food served in restaurants with that for food sold through other channels and to adopt compensatory measures such as tax exemptions, incentives for digitalization and investment, vocational training programs and intensifying the fight against evasion.

HoReCa sector representatives warn that otherwise we risk losing one of the most critical industries of the economy, with a direct impact on tens of thousands of businesses and hundreds of thousands of jobs.