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Current VAT Legislation Has Problems

New rules on VAT

eTN Staff Writer  Oct 24, 2008

Travel and tourism is the largest sector of the EU economy. Europe’s share of global tourism is declining – bad news for European exports. What’s worse, current EU VAT rules make it more costly for EU-based, tour operators to promote Europe as a destination, so much so that they cannot compete on price with operators based outside the EU.

Current VAT legislation has further problems; it is not applied evenly across the EU, and the law has the effect of adding more tax than was originally intended by national governments.

At the annual conference of the European Tour Operators Association (ETOA), new proposals will be presented to reform the application of VAT to travel. These will be explained in detail by David Bennett from the accountancy firm Saffery Champness and following this, those in attendance will be able to put their questions.

David Bennett said, “The way in which travel is taxed across Europe has made for possibly the most complex and frustrating set of rules and obligations affecting any market sector. It is full of ambiguities and inconsistencies. It is also counterproductive as it penalizes travel businesses located in the EU and acts as a disincentive for non-Europeans to travel within the EU. I believe we have created a sensible set of proposals, which would remove the current deficiencies and improve the competitiveness of the EU as a destination.”

Tom Jenkins, executive director of the European Tour Operators Association, said, “If you are a UK-based lawyer drafting a contract for someone based outside the EU, your bill would not be subjected to VAT; if you are a UK-based exporter selling to someone based outside the EU, your bill would not be subjected to VAT; however, if you are a UK-based operator or events organizer creating a travel incentive or event for someone based outside the EU, your margin is subject to VAT under TOMS. This is quite unfair. The industry suffers from totally unjustifiable discrimination vis a vis foreign-based competition. ETOA’s proposals will lay out how EU VAT law should be reformed to put EU-based operators on a level playing field with other exports.”

Delegates at the ETOA conference comprise senior managers from Europe’s major touroperators, hotel groups, tourist attractions, coach, rail and cruise companies, and local tourist boards. Collectively, as buyers, they have a strong influence on which destinations and attractions are more or less successful, as they spend over €7bn a year on Europe’s sights, hotels, and transport on behalf of their customers.

About the Global European Marketplace

ETOA’s Global European Marketplace (GEM) is the most important gathering of the
European inbound tourism industry. It takes place on Thursday, November 6 at the Copthorne Tara hotel in Kensington, immediately before World Travel Market in London and all the major players participate, including Accor, American Express, British Airways Holidays, Collette Vacations, Cosmos, Eurostar, Expedia, Globus, Gullivers, Hilton, Historic Royal Palaces, Kuoni, London Eye, Maritim, Marriott, Sixt, Sol Melia, Residor, Royal Collection, Starwood, Tauck World Discovery, and Tussauds Group.

The GEM comprises a conference, workshop, exhibition, and black-tie dinner at the Café Royale. The conference is attended by over a hundred top executives, high-level consultants, and the media. The workshop facilitates approximately 7,500 one-on-one meetings between senior-level buyers and sellers, with the buyers seated at tables and sellers circulating to meet them.

About ETOA

Since its foundation in 1989, ETOA has grown exponentially to include over 400 member organizations, of which more than a hundred are tour operators. Collectively, ETOA represents over €7 billion spending on accommodation and travel services annually.

ETOA provides representation at the European government level for companies involved in bringing tourists to Europe. The Association promotes greater awareness of the benefits provided by the group travel industry in Europe - particularly increased income and employment. ETOA also influences European tourism policy and legislation.

Areas of specific activity include:

• Promoting Europe as a tourism destination
• Establishing codes of conduct and guidelines for its members
• Establishing commercial opportunities between buyers and sellers
• Working with other travel and tourism associations to raise the industry’s profile

New rules on VAT
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