Travel companies are concerned about Germany’s VAT plan: Travel Weekly

Tour operators are largely taking a wait-and-see approach in response to news that Germany plans to impose a new tax against foreign tour operators in January.

But some are clearly unhappy with the country’s move to make more money from tourism.

The value added tax (VAT), which would apply to non-EU tour operators selling holidays to Germany, could be high enough to affect tour prices for consumers, operators say.

Tauck, who runs a number of tours and river cruises in Germany, says she has a number of serious concerns with the new VAT.

“For starters, the timing of the proposed January 1 start date does not allow Tauck or other tour operators to factor the costs of the new tax into our 2023 prices, which were announced many months ago,” Jeremy Palmer said. , COO of Tauck. . “Because we have a strict policy of respecting our published prices, we will be forced to fully absorb the added VAT costs for a whole year.”

There is also concern about how much additional paperwork the VAT would create, given that companies will be required to file tax returns in Germany, which they have not done before.

“There will be a significant administrative burden on tour operators and because the specific processes have not yet been announced, we are unable to do anything right now to put systems in place or otherwise prepare,” Palmer said. “In fact, it is not at all clear that Germany is now or will be prepared for all the administrative work that VAT will create for itself. The whole proposed implementation seems ill-timed and ill-advised, and of course, we are already paying significant taxes for our operations in Germany.”

Globus also said it may take losses to maintain price integrity.

“In general, when prices are set, the Globus family of brands absorbs additional costs so that travelers are not affected by variable prices,” said Steve Born, Globus’ chief marketing officer. “We anticipate that this will be the situation in January when this new tax comes into effect.”

Some suppliers say it is still too early to say how they will respond, given how much uncertainty remains over how Germany plans to collect and enforce the tax, which would apply to thousands of travel businesses in foreign markets.

Ulla Hefel Bohler, COO of Travel Corporation, mentioned the uncertainty of “how the new tax regime will be implemented”, and specifically whether it will affect 2023 bookings for German travel made before December 31. Bohler said the tax could result in higher consumer-level tour prices for the Travel Corporation’s 42 tour brands, as fees could range from 2% to 9%.

“The introduction of this new sales tax will clearly have an impact on prices, which may affect bookings on these routes as German products will have higher markups than other European destinations,” Bohler said. “Given that the travel industry is still recovering, the timing is surprising.”

Tour operators and industry leaders worry that Germany’s move to charge an additional tourist tax will prompt other countries to follow suit.

“We are concerned about this VAT approach spreading to other markets and increasing the cost of travel over time,” said Robert Drumm, CEO of Alexander + Roberts. “Reviving travel demand makes such a new tax structure attractive to the authorities, of course. The entire USTOA community is paying attention.”

Both the USTOA and the European Tour Operators Association (ETOA) have taken strong positions against the tax.
ETOA CEO Tom Jenkins said the German government has yet to officially notify its foreign market partners of the potential future tax and, as operators such as Tauck have pointed out, says the 2023 tour prices are already set , with some tours booked and paid for.

“The industry has been left in limbo,” Jenkins said. “The German holiday that will take place in 2023 has already been planned and costed. This is a significant investment that could lead to losses as a result of this measure.”

Tauck’s Palmer said the industry needs to form a united front in opposition to VAT.

“We also urge our tour industry peers to support the efforts of USTOA and ETOA,” he said. “There is strength in numbers and these two organizations are very powerful voices on our behalf.”

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