How tourism is taxed is the most influential factor on business viability. The added value of intermediation is often poorly understood. The EU is at a disadvantage for three reasons: it taxes tourism exports, the price of holidays to non-EU destinations is VAT-free, and local taxes have increased significantly. Some European authorities are seeking to collect a tax on B2C sales of European product made outside the EU.
Tax systems need to be efficient, fair and effective. The cumulative effect of additional levies is critical. The increase in devolved tax-raising powers through overnight taxes and access charges was noted as a significant factor in competitiveness by the OECD in 2014. Visitors typically do not vote and they are an easy source of revenue. However, they do notice both price and service level. Both they and business have a choice.
Reform is complex. For example, change in primary EU tax law requires unanimity among all member states. Locally, tax on tourism makes sense if it improves infrastructure and services that benefit residents and visitors. Taxation without benefit to the taxpayer may bring short-term relief to hard-pressed budgets, but it will cause long-term competitive harm despite being a poor mechanism to manage demand.
Current Regulatory Progress
While it is thought unlikely the VAT package for travel and tourism will make regulatory progress before 2024 elections in due to the diversity of measures it proposes – not just on TOMS VAT, but also passenger transport and duty free – the EU’s VAT in a Digital Age package (ViDA) is different. Most member states are reported to support its proposals for digital reporting and invoicing so any remaining objections may be overcome. This may increase pressure to support another ViDA proposal, the ‘deemed supplier regime’ (DSR). Intended to minimise VAT leakage, in practice it would be highly problematic for small service providers and platforms, as well as national tax authorities. In November 2023 ETOA added its voice EU Travel Tech and other industry partners in urging caution against its adoption.
ViDA was covered at an indirect taxation Drop In on 13th November 2023: recording and presentation available here.
ETOA’s policy objectives
- A tax framework that encourages value-adding and Europe’s tourism exports
- Reciprocity: revenue must pay for services or support purposes that benefit residents and visitors*
- Ease of compliance, better consultation and sufficient notice of change
* In the context of sectoral decarbonisation, taxes hypothecated to support the green transition could fall within the definition of reciprocity.
What we are doing
- Lobbying and participation in expert groups on legislative review
- Expert advice through seminars, online briefings and helpline
- Research and reports on policy impact
For further information, please contact firstname.lastname@example.org
Day and Overnight taxes
ETOA monitors over 100 destinations which levy a tourist tax on day or overnight visitors, or a special tax on tourism services, e.g. Amsterdam’s VMR tax. The database of tax rates is a member-only service requiring members to use their website log-in details to view. Information on ETOA’s lobbying position can be found clicking on ‘Read more’ below. ETOA also contributes to partner’s work on this topic, e.g. Group NAO’s ‘Tourism taxes by design.’
Tour Operators Margin Scheme (TOMS)
This is a ‘special scheme’ that applies to agents and operators packaging and selling EU tourism product. It remains an intelligent simplification: it shares tax benefit between destination and operator’s country of establishment; it minimises the need for multiple registration; it is relatively easy to administer. However, it still taxes exports to non-EU clients, partly because the service of packaging is not seen as something clients enjoy in their home country. As of late 2024, it is currently under review as part of a wider regulatory ‘package’ of proposals affecting TOMS, duty free sales and tax on passenger transport.
The Federal finance ministry has postponed its proposal to change its treatment of non-EU B2C sales of German tourism product until 1st January 2027. The change is not required by Brussels: it is a unilateral action which risks causing wider disruption as well as harm to Germany inbound. Together with our partners, we continue to argue against it.