Estonian hotels: Canceling VAT hike will help make investments

Viljandi Grand Hotel, otherwise known historically as EVE. (Siim Lõvi/ERR)
11/18/2016 1:40 PM
Source: BNS
Category: Business

The new coalition's plan to cancel a hike in value added tax (VAT) on accommodation establishments will have a positive effect above all on tourist establishments outside Tallinn that will be able to continue investing and pay more competitive wages, the Estonian Hotel and Restaurant Association said.

Abolishing the VAT hike is a very strong regional policy measure that will help maintain the competitiveness of the Estonian economy in rural areas in the first place, chairman of the association Verni Loodmaa told BNS.

"A typical accommodation establishment in Estonia is a family-run business outside the capital city," Loodma said. "Canceling the tax hike is a strong message to rural areas that you are not alone."

In his words, this step also signals the new coalition's willingness to interact with entrepreneurs and heed their proposals. "In addition," he added, "It will allow [establishments] to maintain the Estonian tourist industry on a good level as well as make investments and pay more competitive wages than would have been otherwise possible in a sector whose wage level is not very high."

The coalition being formed by the Center Party, the Social Democratic Party (SDE) and the Pro Patria and Res Publica Union (IRL) intends to cancel the planned rise of the VAT rate for accommodation establishments from the current 9 percent to 14 percent beginning from Jan. 1, 2017. Estonian tourism and accommodation establishments have more than once appealed to the government and the Riigikogu to put off the VAT hike.

Editor: Aili Vahtla

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