17 / 24
Investment and Treasury
A low VAT rate provides resources for the improvement
of quality and competitiveness of tourism products
and services. In a highly globalised tourism market,
not only price but also the quality of the offer
matters. High tax burdens, especially a high rate of
VAT, tends entrepreneurs to keep prices competitive,
thus withholding investments into renovation and
improvement of the quality of the offer.
Besides price competition in the global tourism market, a competitive price-performance ratio is of utmost
importance as well for attracting visitors. This ratio can be improved either by price reduction or by the
improvement of the offer, for which, however, financial resources are indispensable. Such resources can be more
available, when e.g. low VAT rates relieve entrepreneurs from fiscal pressure and thus leaving more manoeuvre
to invest in the performance of the services.
The example of
Germany
and the VAT reduction of 2010 for accommodation services demonstrates, how much
low VAT rates can contribute to increased investments into the sector and thus increasing its performance.
Where on average hotels in Germany were investing around 90.000 Euros in their establishment in 2009, this
figure increased to 119 and more importantly to 243.000 in the years 2010 and 2011, respectively. 2011 marked
also the year, when more was invested than depreciated, putting an end to a period of the overall deterioration
of assets. Investments were done mainly to the acquisition of machinery and equipment as well as in the
renovation and modernisation of guest rooms.
32
These measures resulted in Germany in an improved price-
performance ratio compared to the years prior to the VAT reduction.
Comparison
groups
Value of fixed assets
on 31. December ……
in thousand EUR
Depreciation in
thousand EUR in
year ……
Investments
in thousand EUR
in year……
2009 2010 2011 2010 2011 2009 2010 2011
Hotels
1.772 1.721 1.804 170
160
90
119
243
Hotel garni*
672
651
674
86
82
64
65
105
*Hotels without restaurant Source: dwif e.V.
The VAT reduction for accommodation services has also paid off for the Treasury in Germany - even without
taking into account any economic multiplier effects. According to the VAT tax statistics published by the German
Federal Statistical Office - the VAT revenue in the hotel industry rose by EUR 72.8 million to EUR 3,493 billion in
2015 compared to 3,420 billion in 2009, the year before the VAT reduction from 19 to 7%.
In
Ireland
, the Irish Hotels Federation estimates that there has been a 79% increase in activity covered by the 9%
Vat rate since 2011, following the reduction from 13.5%.
33
This increase means that annual VAT receipts to the
exchequer relating to this activity are now €202 million more than in 2011.
“The VAT reduction paid off for the
Treasury, too: The total VAT revenue from
the German hotel industry in 2015 was
already higher with a 7% rate than it was in
2009 with a 19% rate”
Mr. Otto Lindner, President of IHA-D
HOTREC - Report on the benefits of low VAT on job creation and competitiveness in the European Union
|
17