European journey and tourism taxation: A deteriorating drawback
Taxation on travel and tourism services remains a problem in Europe that is not getting better but is actually getting worse.
- Amsterdam has a controversial VMR tax that is primarily aimed at the group travel industry and it just doesn’t work.
- Germany is about to make a proposed change to the indirect tax regime for non-EU buyers, which, following the current suspension, is planned for 2022.
- EU travel destinations suffer from a competitive disadvantage as the sale of vacation travel to non-EU travel destinations to EU consumers is still VAT-free.
With COVID-19 vaccinations running at full speed across Europe and around the world, with borders opening and travel restrictions easing, it is the best time for European governments to lay the foundations for a travel and tourism friendly environment. That’s not the case.
Amsterdam’s controversial Vermakelijkhedenretributie (VMR tax) is largely aimed at the group travel industry and is not working. The consumer’s final seller is obliged to collect the tax and transfer it to the city. This means that the local tax authority of an EU city is trying to reclaim indirect taxes from companies based around the world. Obviously this is impractical, but the system is still in place and can grow in size.
In Germany, the proposed change to the indirect tax regulations for non-EU buyers (described here) is planned for 2022 after the current suspension. But nothing is certain, and the operators cannot evaluate German products with confidence. They have two options, both of which are bad: either charging a higher price to cover additional taxes and administrative costs and still maintaining an economically viable margin, or they try to stay price competitive and take the risk of selling at a loss by they trust that such a self will remain on hold until an EU-wide solution is agreed.