Tourists as taxpayers
Summer is the season when Europeans get some much-needed rest and relaxation. It’s also a time to pay taxes!
Five out of the top 10 visited destinations in the world were in the EU, according to the latest European Union Tourism Trends Report (2019). Europe has been rated the most visited region in the world by the UN's World Tourism Organization (UNWTO).
The EU tourism ecosystem encompasses many types of businesses, including tour operators, travel agents and accommodation suppliers.
As one of the ecosystems most affected by the coronavirus, tourism this summer will feel and look different. Tourism tax collections can help mitigate the negative effects, helping to further develop the tourism services and improving infrastructure for the future.
Two types of tourism tax
According to the UNWTO, tourism taxes are applicable specifically to tourists and the tourism industry. There has also been a general increase in the number and scope of tourism-related taxes, fees, charges over the last decade.
In most European countries, taxation systems are based on two primary types of taxes: direct and indirect. A distinction can be made between direct taxes levied “directly” on income and (possibly) wealth, and indirect taxes that are levied on the from the purchase of goods and services (e.g. VAT).
VAT is the most commonly paid tax when residents and tourists buy a product or pay for a service – anything from ice cream to a massage. What’s more, VAT is an indirect tax, as it is paid by the buyer to the seller as part of the price.
Member States have to apply the rules of the Directive on the Common system of value added tax. The principle of the common system of VAT entails the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services.
However, all EU countries have a different VAT rate. The standard VAT rate they apply must be at least 15 %, and the reduced rate at least 5 %.
Some EU countries have decided to reduce VAT to help stimulate tourism growth. For example, in 2009, France reduced VAT in restaurants.
Flying high
Some countries have set up a tax when travelling by aeroplane. In Greece, for example, a passenger tax (Airport Development and Modernisation Charge) was introduced in 2001 on passengers (over the age of five) departing from Greek airports, with transit, and transfer passengers exempted.
In France, the Civil Aviation Tax (TAC) came into effect in 2006 and is payable by any public air transport embarking on passenger, freight and/or mail from the French territory. An air travel tax was also introduced in 2009 on each passenger leaving Ireland by air.
In addition, the German Air Ticket Tax was created in 2011, to promote more ecologically friendly behaviour.
Bed and breakfast
The tax you pay when you spend one night or more in a hotel is called “occupancy tax” (applied in 18 EU countries).
Ireland has been applying this tax since 1939! It is related to registration fees for hotels, guest houses, holiday cottages and apartments, hostels, youth hostels, caravan and camping parks.
In the Czech Republic, a bed night tax is in place to support the development of tourism and to provide funding for towns to help cover the expenses. The current rate for the bed night tax is set at CZK 15 per person per day.
Going green
Green or eco-taxes are being used in a variety of sectors to develop technologies for tourism and consumer products that are more sustainable for the environment.
For example, in 2004, Portugal’s tax for energy efficiency certification and air quality for Tourism Enterprises was introduced to cover any construction, remodelling, leasing and renting of tourism establishments. It is a certification system that aims to provide information about the thermal quality of buildings, in order to ensure energy efficiency and good air quality.
Competitiveness
The impact of Taxes on the competitiveness of European tourism is a 2017 report that highlights how important it is to reduce the amount of taxes on tourists to improve the competitiveness of the sector. There is a dual need to raise revenue and maintain competitiveness. For instance, Members States that tax activities related to tourism also find a balanced way between these two aims.
Would you like to explain what is VAT to your children or pupils? Take a look at our content tailored for young children and teenagers.
Explore with your children or pupils VAT’s benefits with the robot 2QT.
Discover how tax can help protect the environment with your pupils.
More information about tax and tourism in the EU: