European travel and tourism taxation: A deteriorating problem

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Leaving aside the question of any government seeking to impose a tax on value-adding activity that takes place extra-territorially, the practical challenges of enforcement are evident. Value-adding within the EU must be encouraged, as should the packaging and sale of EU product in Europe’s origin markets that secures valuable export revenue. These aims are not mutually exclusive. For businesses in the EU, another anomaly persists: EU destinations still suffer a competitive disadvantage because sales to EU consumers of holidays to non-EU destinations remain VAT-free.

With a budget boosted by recovery funding, “More Europe” is coming: on energy generation and transmission; breakthrough technology for fuels and propulsion; public health coordination and an information infrastructure to keep borders open and fluid; skills training and the digital transition. More Europe is also needed in the form of a reformed EU tax regime that can cope with the complexities of the global travel and tourism supply chain. Change will require unanimity among member states in order to encourage enterprise, ensure equitable treatment and provide adequate revenue.

Meanwhile, for Amsterdam, the ironic consequence is that businesses within the city’s jurisdiction are likely to suffer the most either through being co-opted into the business of tax collection – required to identify final vendor or pay the tax themselves – or receiving less business because of the deterrent effect. For Germany, its inbound tourism industry already risks the loss of non-EU business due to uncertainty about a tax regime that may apply in just over seven months. ETOA is conducting research to assess the potential impact. For more on tourism and tax, click here.

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