Instead of canceling VAT payments for tourist accommodation, the coalition is considering raising the tax rate, and the decision will also affect VAT for the press, writes ERR News.
Part of the tax reform plan developed by the government envisages abandoning the current 9% VAT rate for tourist accommodation and raising it to 22% after 2025. Finance Minister Mart Võrklaev said the anxiety of accommodation managers and owners is understandable, especially given how hard the sector was hit by the Covid-19 pandemic. He added that the tax bill has been submitted to the parliament and has already been considered in the first reading.
Võrklaev pointed out that the main issue of discussion is
how to get the tax rate to increase, but so that this process is not too fast.
Representatives of the tourism sector have suggested a 12% VAT rate as a possible option. Finance Minister said that it is not possible to talk about specific figures at the moment, but it is clear that the result will be between 9% and 22%, and it will be necessary to reach a compromise.
Two VAT rates may apply in European Union countries. In Estonia, the main rate is currently 9%, and in some areas, a 5% VAT rate is applied. The lower rate also applies to press expenses. The minister pointed out that if the VAT for tourist accommodation increases, it should also increase for other goods and services in the same group, such as medical goods. However, Võrklaev personally believes that changing the VAT on medicines is not a good idea.
There remains the possibility of waiving the 5% VAT rate, which has been applied to press expenses since August 2022. The minister explained: “From the government’s point of view and from the finance ministry’s point of view, we’ve also done various calculations to see what this means in terms of numbers. There has been close cooperation and this move is being seriously considered.”
According to the calculations of the Ministry of Finance of Estonia, a rapid increase in the VAT rate to 22% creates certain risks, for example, the number of tourists may decrease. However, the minister pointed out that the state has seen the possibility of additional income, and it is likely that a compromise will have to be found. In addition, the anxiety of the press representatives about the increase in the VAT rate applied to them should also be taken into account.
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