ECTAA Calls on EU to Revise VAT Rules for Travel Agents

Europe’s travel agents and tour operators are urging the Commission to review and revise a set of special VAT rules to meet the demands of the digital era and to ensure the sector’s competitiveness. 

Representing some 70,000 travel agents and tour operators in Europe, the European Travel Agents & Tour Operators Association (ECTAA) is requesting clearer, simpler, and more harmonized rules for travel operators whilst keeping those flexible, adding that it is now more than ever important to make the necessary changes to the tax policy area to assist travel businesses and help them address the impact of the Covid-19 crisis. 

More specifically, ECTAA, is requesting that the Commission accelerate the revision and modernization of the special VAT scheme, adding that the travel services market has undergone huge transformations which must be reflected in the new rules in order to safeguard competitiveness.

Though ECTAA acknowledges that the current VAT scheme has been efficient in simplification for enterprises and ensuring the fair allocation of VAT revenue between member states, it lists a number shortcomings.

ECTAA notes that the current scheme:

–  is “unfair” in relation to VAT treatment of non-EU operators, which it says “puts at risk EU competitiveness and EU VAT revenue”

– is “inefficient” in relation to the non-deductibility of input VAT for B2B travel agents

– is “outdated” compared to the way travel services are sold online

– does not ensure competitiveness putting travel agents at a competitive disadvantage compared to those supplying outside the scheme

– lacks “clarity and harmonisation” – ECTAA refers to a vague definition of travel services, which, it says, leads to double or non-taxation in certain circumstances.

“Time has come now to review the rules that date from 1977. The market for travel services has undergone huge transformations. The rules must reflect these changes to allow travel enterprises to operate on a level-playing field and provide certainty about the applicable rules, which are very diverse across the EU,” said ECTAA President Pawel Niewiadomski.

ECTAA has repeatedly over the last two decades called for the revision of the VAT scheme and expressed it disappointment when EU states failed to reach an agreement on a proposal to revise the policy, resulting in its withdrawal by the Commission in 2014.