1 HOTREC and some of its activities VAT and smoking Dániel Makay Policy Advisor, HOTREC Zagreb, 22 November 2010

1

HOTREC and some of its

activities

VAT and smoking

Dániel MakayPolicy Advisor, HOTREC

Zagreb, 22 November 2010

2

Contents

I. Brief introduction to HOTREC

II. VAT

III. Smoking

IV. Conclusions


3

Represents

hospitality industry at European level

40 National Associations

in 24 European countries

Brief introduction to HOTREC


4

European hospitality sector in the EU-27

1,7 million enterprises (mainly micro enterprises)

9,5 million persons employed Automotive production: 2,2 million Chemical industry: 1,9 million

195 billion EUR value added Automotive production: 155 billion EUR Chemical sector: 194 billion EUR



5


Monitor EU developments of likely impact on the sector

Coordinate Members’ views

Lobby Institutions - Commission

- European Parliament

- Council of Ministers

What do we do?


6


More than 80% of national legislation is made by the EU

Important to influence the law making process at the source, before being transposed at national level

Important role of national associations in contacting their MEPs and governments as well

Why is this work important?


7

VAT Smoking

Food labelling Hotel classification Quality Fire safety ...

Some of many issues:



8

Background:

VAT in general in the EU: (Directive 2006/112/EC)

1 standard rate of not less than 15%

1 or 2 reduced VAT rates of not less than 5%

The reduced rates can be applied to the products and services listed in Annex III of the Directive (incl. accommodation and restaurant services)

VAT


9

Background:

VAT on accommodation and restaurant services

Before 1 June 09: Hotels: option: - standard rate (≥ 15%)

- reduced rate (≥ 5%)

Restaurants: in principle standard rate…except if already reduced rate before Jan 91 or negotiated in accession treaties (in total 11 countries)

After 1 June 09: all Member States allowed to apply reduced VAT rate ALSO to restaurant services (incl. all beverages)!

VAT


10

Background:

Future

Commission to launch broad debate on ”reforming” the EU VAT regime still this year

Legislative proposal not expected before end 2011 or 2012

To be watched very carefully!

VAT


VATBackground:

•Since 1 June 2009 3 countries introduced reduced VAT rate for restaurant services:

France

Belgium

Finland

•Under consideration in some other countries


12

VAT – Rates for hotels


13

VAT – Reduced rate for hotels


14

VAT – Rates for restaurants


15

VAT – Reduced rate for restaurants


VAT France

Change of VAT rate for restaurant services

•Before 1 July 2009:

19,6% on all restaurant services:

•After 1 July 2009:

5,5% on food and non-alcoholic beverages

19,6% on alcoholic beverages remains


VAT France

Background

•Long time promise of many governments to lower VAT for restaurant services

•Possible only following the agreement at EU level

•Main aim: all should benefit

Consumers

Employees

Restaurant owners


VAT France

Some results

•Cut of prices by majority of establishments

•Almost 30.000 more employees after 1 year

•4 types of hospitality jobs among 15 most popular jobs

•14% of all recruitement in the hospitality sector

•Wages up by more than 3%

•More restaurant business established than in the rest of the economy


VAT Belgium


•Before 1 January 2010:

21% on all restaurant services

•After 1 January 2010:

12% on food

21% on non-alcoholic and alcoholic beverages


VAT Belgium

First results possible to see so far

•Number of backrupcies decreased

•Employment situation is stabilised

•Turnover increased by almost 7% in 1st quarter of 2010

•Many technicalities still to be clarified


VAT Finland


•Before 1 July 2010:

22% on all restaurant services

•After 1 July 2010:

13% on food and non-alcoholic beverages

23% on alcoholic beverages


VAT Finland

First results

•Prices reduced by 5,7% so far (close to 6,6% compared to 100% participation)

•Turnover increased by 4,5%


VAT Germany - hotelsResults of the VAT reduction from 19 to 7% on rooms (1 January 2010):

•717,6 Millions of Euros spent on renovation, modernisation

•5.747 additional jobs out of which 2.150 full-time jobs

•32,2% of establishments have reduced their prices by an average of 6,5%

•29,2 Millions of Euros to increase wages,

•12,8 Millions of Euros for training


VAT Latvia - hotelsResults of the VAT reduction from 21 to 10% (1 May 2010):

•6.000 more persons employed

•Turnover increased by 5%

•Additional social and income taxes of ca. 21-26 millions EUR

VAT increase in 2009 from 5% to 21%

•12.000 fewer persons employed

•Decline in social and income taxes of 14 million EUR


VAT Arguments - Summary

Why a reduced VAT for restaurant services?

•Lower prices

•High price elasticity

•Job creation

•Reduction of illegal work

•Bringing people into employment


VAT Arguments - Summary

• More resources for training

• Investments in the sector: other sectors benefit as well

• Modernisation of the establishments

• Promotion of culinary heritage

Croatia and all EU Member States should make use of the

benefits of a reduced VAT rate applied to restaurant

services! Zagreb, 22 November 2010

EU policies against smoking

At European level developments related to smoking are linked to activities of World Health Organization

• WHO adopted anti-tobacco Treaty in 2003: Framework Convention on Tobacco Control (FCTC)

• Ratified by all EU Member States but Czech Republic

• Croatia ratified in 2008

• No EU legislation on smoking so far, but increasing pressure (e.g. DG Sanco, Health NGOs)

Smoking


EU initiatives against smoking

1) Council Recommendation on smoke-free environments adopted on 30 November 2009 (AT, SK, CZ abstained)

• Objective: to incite Member States to comply with their legal obligations stemming from the WHO anti-tobacco Treaty (Art. 8: protection from tobacco smoke)

• A non-binding measure but can put political pressure on those Member States without total smoking bans!

Smoking



1) Council Recommendation on smoke-free environments

• Calls on Member States to adopt within 3 years (2012)

“Comprehensive legislative measures” against smoking

- i.e. smoking bans (without any exception) in all indoor public places, workplaces, etc.

- Legislation may cover “outdoor” or “quasi-outdoor” public places “where appropriate”…

Smoking



1) Council Recommendation on smoke-free environments

• Member States to inform the Commission of legislative or other actions taken in response to Recommendation

• Possible impact on hospitality: Member States to revise and extend the scope of smoking bans (hotel rooms, terraces, etc.)?

Possible implementation at national level to be followed very carefully!

Smoking



2) Initiative by DG Employment

Smoking

• Consultation on possible EU action to protect workers from passive smoking

• Still ongoing

• Outcome very uncertain

Also to be followed carefully!


Smoking bans at national level

Constant trend towards stricter smoking bans

Smoking (cont’d)

• Total bans on smoking in all enclosed public places including bars and restaurants: Ireland, UK, Cyprus, Finland

• Smoking bans allowing for special enclosed smoking rooms: Italy, Malta, Sweden, Slovenia, the Netherlands:

• Smoking allowed in smaller establishments: Austria, Denmark, Romania, most German Länder,

Legislation changes constatly in many countries!


HOTREC and EU initiatives against smoking

The position of HOTREC

•In view of recent legislative developments in the various Member States regarding smoking rules EU action is not needed and it could also interfere with national legislation

“HOTREC is of the opinion that the issue of smoking in public and work places is best tackled at national level, where local and practical conditions can be better taken into account”

Smoking (cont’d)


34

Conclusions

National associations and HOTREC The Future Areas dealt with by EU institutions is ever increasing

An ever increasing number of countries

Importance of strong lobby

Importance of close collaboration

Importance of exchange of experiences

Importance of being together!


3535

Thank you very much for your attention!

www.hotrec.eu


Documents

1 HOTREC and some of its activities VAT and smoking Dániel Makay Policy Advisor, HOTREC Zagreb, 22 November 2010