On either side of the English Channel, battles over hospitality taxes are raging. French authorities, presiding over the biggest tourism country market in the globe, are looking to increase bed taxes. Meanwhile their UK counterparts are under the onslaught of a new campaign to cut sales taxes, to help boost the sector.
In France, a draft budget proposes two tax increases, to raise additional revenues for government. The first would increase the country’s bed tax, currently up to EUR1.50 per guest per night, to a maximum of EUR8. This would, the authorities argue, bring the tariff in line with comparable charges levied on hotels in other European cities such as Brussels, Rome and Berlin.
The “tax de sejour” is an established business cost for French hoteliers, graded according to the quality of the establishment. Currently it runs from EUR0.20 to EUR1.50 per night depending on star ranking, but this would increase substantially under the proposals. Secondly, a localised tax for the Ile de France region would help raise funds for investing in public transport infrastructure, with an additional EUR2 per night levy.
The proposals have been roundly criticised by hospitality leaders, including Accor’s Sebastien Bazin, who called the idea “unjust, unsustainable and dangerous”. Also complaining have been several government ministers, including the foreign affairs ministry. France ranked as the globe’s number one tourist destination in 2012, with 83 million international visitors; but it was third when comparing receipts, with its USD54bn putting it behind the US and Spain.
In the UK, 60 members of parliament are supporting a new campaign to cut hospitality sector taxes. The Give Us a Break campaign is calling for a reduction in VAT to 5% on hotel accommodation and tourist attractions, a move it says could help create 120,000 new jobs and prove cashflow positive for the chancellor inside five years.
The UK is one of only four EU countries not to have cut hospitality sector VAT, and campaigners note rivals Portugal, Holland and Belgium levy just 6% on hotels, holiday camps and tourist attractions. This, they argue, can make it cheaper for a British family to buy an equivalent holiday on the European mainland, rather than near home.
Campaigners say the sector runs a GBP17bn deficit, as five Brits holiday abroad, for every two foreigners who visit the UK. Hotel groups including IHG and Accor have backed the campaign, with Accor’s UK director Thomas Dubaere insisting: “The current rate of VAT, which is double the European average, discourages a large number of potential visitors and prevents the industry from achieving its true potential.”
HA Perspective [by Chris Bown]: Never mind what the UNWTO preaches to governments about cutting tariffs and opening up borders, to encourage tourism revenues. It seems that government finance departments are similar the world over: look for a sector that’s growing strongly and work out how to extract more tax.
In France, the tourism sector is one of the few that is growing, so in January it was asked to swallow a rise in VAT from 7% to 10%. Having got that through, treasury officials now appear to be testing the envelope further. France’s first place ranking in the list of global tourism destinations is there for it to lose, should the bean counters get their way.
When rules were relaxed in 2006, most EU governments took the opportunity to flex VAT rates, to help their hospitality sector and encourage tourism. Not so the UK, where the standard rate continued to be applied, and a cash-strapped government upped the baseline from 17.5% to 20% in 2011.
Campaigners in the UK should not hold their breath: the British government’s support for the hospitality sector has been woeful. Air Passenger Duty has only recently been marginally trimmed, despite well advanced arguments about the economic benefits of doing so; and progress on easing visa restrictions for Chinese visitors is similarly slow.
For the UK’s finance minister, the problem with cutting tax in one area means the loss – estimated at GBP12bn by one firm of accountants – would have to be made up by increasing taxes elsewhere. The latter is hard to achieve, making the former unlikely to happen. Industry executives need to put their effort into the recently established Tourism Council, where they can continue to nag tourism minister Helen Grant about these issues, while planning a united promotional front to market UK tourism. Ironically, they may need to implement a bed tax to fund marketing – but at least those paying it will know it is being spent for their benefit.