HOTREC has published a major economic study by Syntesia Policy & Economics on the impact of taxation on the hospitality sector in Europe. The research comes at a crucial time, as several governments consider increasing VAT and expanding local tourism taxes.
Covering the EU-27, Iceland, Norway and the UK, the study combines macroeconomic modelling with case studies from Ireland, Amsterdam and Denmark. Its conclusion is clear: sudden or poorly coordinated tax increases could destabilise hospitality markets, particularly for SMEs and rural regions.
In extremis, aligning hospitality with standard VAT rates would threaten, according to one of the scenarios analyzed, almost 1 million jobs. This would be equivalent to a 0.5% drop in EU GDP, largely due to business closures linked to low margins and supply-side shocks. Even a small 1 percentage point increase in VAT could reduce sales by €8 billion and eliminate over 100,000 jobs, many in vulnerable local economies.
Importantly, the study also addresses the positive effects of the VAT decrease. A reduction of just 1 percentage point could generate additional revenues of 2.5-4 billion euros for the sector and could create between 30,000 and 50,000 jobs, a strong argument for VAT as a stabilization and competitiveness tool.
The report also highlights the rapid growth of tourism taxes in urban destinations – already approaching 40% of VAT revenues in some cities. Combined with labor costs and parafiscal taxes, these taxes form a cumulative burden that policymakers should assess holistically.
More details about the study results can be found here. hotrec-taxation-study_full-report.
