EU ministers are due to discuss article 26 of the VAT directive 77/388/EEC, which could result in taxation of profits on the transport element of package holidays taken within the EU on a uniform basis.
Currently, transport within tourism packages is subject to VAT, but some member states including the UK allow tour operators to structure transport procurement in such a way that the VAT liability is minimised.
According to KPMG, the article if enforced stands to result in higher prices for consumers or reduced margins.
Hugh Green, UK head of KPMG travel, leisure and tourism practice, said: ‘The last thing tourism needs is for factors outside operators’ control to cause costs to mushroom. Consumers are very price sensitive and a hike in prices, as a result of VAT, will push customers away.’
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