P.R. Restaurants Association urges eateries to ‘pass on reduced tax’ to consumers
Puerto Rico Restaurants Association Chair José Salvatella urged local eateries to complete the necessary steps to be able to pass on the reduced sales and use tax rate to consumers, who are increasingly eating out.
During an interview on the “En Una Hora” radio program on 11Q 1140 AM, in which News is my Business participates, Salvatella said restaurant owners should move quickly on complying with the regulations recently enacted by the Treasury Department to be able to reduce the tax rate to 7% from 11% on prepared food.
“I urge those restauranteurs to avoid not passing on the benefit to the consumers who visit them, because as a consumer you feel a bit offended when you go to the restaurant of your choice and don’t see the reduced tax rate in effect,” he said.
The reduced tax rate on prepared foods was approved in December 2018, with the island’s reformed Tax Code. Since then, Salvatella said the association he heads — known as ASORE for its initials in Spanish — had been meeting with Treasury officials to roadmap the implementation.
“They have been very cooperative. We ourselves told them that we needed to do this with enough time, so restaurants were ready by the October 1st deadline,” Salvatella said. “Circular Letter 1903, outlining the rules to implement the reduction, was issued in August so restauranteurs had two months to prepare.”
Although he said the implementation has been smooth for those restaurants that were current with their debts with the Treasury Department and had their documents straight, he acknowledged there have been a few bumps.
Specifically, he acknowledged there were a few restaurants that increased their prices when the tax rate was reduced. But he said, “that was the minority.”
“I can go so far as to say that based on an informal survey that we conducted in ASORE, that possibly nine out of 10 did not touch prices, and some even dropped them in reaction to the reduced tax,” he said, noting that restaurants that raised prices were taken care of through pressure on social media.
Late last week, ASORE released the second edition of its annual “EAT” study, which showed that the average consumer in Puerto Rico spends $64 a month in restaurant visits, representing a 17% year-over-year increase.
“Eating out has become a necessity given the pace of life we live. This amount, no doubt, could increase in coming months with the reduced sales and use tax, which could be an influential factor when buying prepared foods,” he said.
The study commissioned to The Research Office firm also confirmed that for the most part, consumers prefer fast-food restaurants and when given the choice between two similar eateries, the majority will opt for a business offering healthier options and that uses local ingredients.
The firm interviewed 1,000 adults between the ages of 18 and 64 during August and September.