Iniquities of VAT

That not all industries are taxed at the same ratios is an axiom that applies to most countries, the US included. And the hotel industry is, unfortunately, the recipient of the short end of that stick. Used often as a piggy bank of politicos looking to dish out pork to constituents in just about any jurisdiction, the rationale is that the tax is directed at those who do not have a stake in the jurisdiction where it is being levied. The Big Apple’s stock of hotels has had more than its share of extortion in that area ranging from taxes for convention center expansion to a “luxury tax” meant to plug deficits brought on by runaway spending. However, the US is far less susceptible to the arbitrarily varying rates of VAT (Value Added Tax) within the “European Union”.

Early March results in the annual visit to Germany for many American operators as they head to Berlin to exhibit at ITB, the gigantic tour and travel expo that attracts operators from virtually every aspect of the tour and travel business from around the world. It is also the the time when Berlin’s hotel rates reach stratospheric levels. The onerous VAT regime of Germany does little to allay the whiplash exhibitors are subject to when bills are paid. At 16%, the VAT is the second stiffest in the EU, with Denmark having the dubious distinction of being numero uno at 25%. Both those countries are also relentless in applying that rate to hotels, restaurants and car rentals. France lies virtually at the bottom with a 5.5% rate for hotels and sharply escalating rates (19.6%) for restaurants and rental cars. Frequent travelers to the EU are familiar with procedures to reclaim VAT on personal purchases like electronics and clothes but few go through the bother of claiming a VAT refund on hotels – perhaps the fact that it is paid for by the employer results in sloth. American Express offers that service as do operators like Insatax.

Published by

Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.

Leave a Reply

Your email address will not be published. Required fields are marked *