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5 REASONS TO KEEP VAT LOW FOR
THE HOSPITALITY AND TOURISM SECTOR
HOTREC - Report on the benefits of low VAT on job creation and competitiveness in the European Union
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1.
Competitiveness of Europe
Tourism and the hospitality industry are operating in a global and highly competitive market. Low VAT rates
allow for maintaining Europe’s competitiveness both in terms of price levels as well as quality thanks to
investments in innovation, contributing to keep Europe the number one destination on the long term.
2.
Employment
The hospitality industry, which employs 80% of the total EU tourismworkforce, is a key driver for job creation
in the European economy. Almost 1 in 20 jobs are provided by the industry directly. The price sensitivity
and the labour-intensiveness of the sector contribute to significant positive or negative impacts on overall
employment depending on the VAT policy applied.
3.
Investment and Treasury
Low VAT rates allow for more significant investments in the sector, thus contributing to further increase
the quality of the offer, being one of the most important factors in global competition. A high level of
investments further contribute indirectly to growth and jobs in the related industries (e.g. construction).
Treasuries see additional revenues and social welfare savings through additional demand and jobs.
4.
Levelling the playing field with the ‘collaborative’ economy
Collaborative economy professional types of activities, especially in the tourist accommodation sector, are
growing exponentially and directly compete with regulated tourism suppliers without complying with the
same rules. As most suppliers in the ‘collaborative’ economy are not subject to VAT, a low level of VAT help
reduce the negative effects of uneven conditions of competition.
5.
Effects on prices
The extra financial resources resulting from a VAT rate reduction are used in different ways. Besides
investments in employment, quality and innovation, prices are also decreasing. Indeed, VAT increases
are often not completely passed on to consumers, but absorbed by the enterprises, in order to remain
price competitive on the market. This, however, may lead to cutting investments, decreased conditions for
employment and eventually to closing down of businesses.