France hoteliers losing out following rise in VAT rate

The French hotel VAT rate rose from 7% to 10% in 2014 as part of reorganisation of all French VAT rates – French VAT rose from 19.6% to 20% Jan 2014.  The hotel VAT rate in France has been just 5.5% in 2015.

One of the trade union representing hoteliers has claimed that the French VAT rise will cost some 30,000 jobs in the industry and supporting sectors.  Hoteliers are being forced to either raise their prices, or face a squeeze in margins.  The latter typically means a drop in wage settlements with workers.  Most hotels have confirmed that they will try and push prices up in the first instance.

The majority of countries in Europe operate reduced VAT rate subsidies for tourism and hotel services.  The exceptions include Denmark (25%), Sweden  (25%) and the UK (20%), which charge their full rates.  The UK Parliament recently rejected a call to reduce tourism VAT.  Germany VAT lowered its hotel rate from the standard VAT rate of 19% to 7%, which created over 6,000 jobs.  Swedish VAT on tourism was cut from 25% to 12% in 2012 and created about 8,000 new jobs in the year since.