Ida-Viru tourism industry opposes VAT increase on accommodation

A spa  hotel in Narva-Jõesuu, Ida-Viru County.
A spa hotel in Narva-Jõesuu, Ida-Viru County. Source: ERR

In a joint petition sent to Estonian Prime Minister Kaja Kallas (Reform) and three government ministers, representatives of the tourism industry in Ida-Viru County have pointed out that the planned increase in VAT on accommodation would put Estonia in an unequal position when compared to neighboring countries. The petition recommends a thorough impact analysis be carried out before any tax increases are implemented.

According to representatives of the tourism industry in Ida-Viru County, an increase in VAT would mean Estonia losing both domestic and foreign tourists to neighboring countries.

"The question for the government is ,where will the domestic tourists go? Where will the foreign tourists go if a room costs €145 in our spas, but  €130 in Finland and €100 in Latvia? And it's not only in spas. These prices are becoming uncompetitive even for smaller accommodation establishments," said Ida-Viru County Tourism Coordinator Kadri Jalonen.

The government's plan to raise taxes has already had a negative impact on the tourism sector.

"Now is the time to recruit new workers for the summer. We can already that people have been discouraged from coming to work in the tourism sector. (Because) maybe it will only be for the summer, if that. Perhaps the initial damage, before anything has come into effect, has already has an impact on us," said Terje Rattur, head of accommodation services in Ida-Viru County.

The tax rise may also have a negative impact on the possible reopening of the Sillamäe - Kotka passenger ferry line. As the tourism sector creates a significant number of new jobs in peripheral regions of Estonia, this should be an important consideration for the government, said Allen Allet, Sillamäe's development adviser.

"If the government is talking about appointing a special representative for Ida-Viru County, then please: here is your special representative! If we can get this shipping line going again, it will provide a boost for the whole region," Allet said.

According to the calculations of the Ida-Viru County Tourism Cluster, the increase in VAT on accommodation would result in less, rather than more money, going into the state budget.


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Editor: Michael Cole

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