"A VAT reduction for restaurants will increase revenue for government due to increased consumption."

The claim in context

PN Leader Alex Borg has argued that cutting VAT for restaurants from 18% to 7% will increase overall government revenue, on the theory that lower prices will drive enough additional dining to more than offset the lower per-euro tax take. This is the supply-side "Laffer-curve" argument applied to a single sector.

The arithmetic

Restaurants paid €234 million in VAT in 2025, per the Finance Minister. A cut from 18% to 7% mechanically reduces the per-euro tax take by 11/18 ≈ 61%. For revenue to merely hold steady, restaurant turnover would have to grow by approximately 157%. For revenue to rise, growth would need to be even greater.

International evidence from comparable VAT cuts (Cyprus 2013 hospitality cut, Ireland 2011–2018 hospitality cut) shows partial offset — lower prices stimulate some additional demand, but never enough to fully replace lost VAT, let alone to generate a net revenue gain. Demand elasticity in restaurant spending is well below 1.

Bottom line

The "VAT cut increases revenue" claim requires implausibly high demand elasticity that no comparable real-world cut has produced. The defensible argument is that the cut would be popular with restaurateurs and consumers; the revenue-positive framing is misleading. Verdict: Misleading.