UK May Block EU VAT Proposals Concerning Tour Operators

by Robert Lee, Tax-News.com, London

24 October 2003

The United Kingdom may be prepared to block a tax measure proposed by the European Commission that the country’s travel industry says could cost thousands of jobs and irreparably damage the British tourist trade, the FT reports.

Angela Shanley, chairman of the British Incoming Tour Operators Association, said the Commission’s proposed changes to the VAT regulations for tour operators known as ‘Toms’, or tour operators margin scheme, would be “catastrophic” for the industry and lead to “irrevocable harm to inbound tourism.”

Speaking to MPs and representatives from the industry, tourism minister Richard Cabourn said that the government is “sympathetic” to the industry’s concerns, and is working closely with Customs and Excise.

The EU meanwhile, denies that the changes will have any negative effect on tour operators and claims that the tax arrangements under the new measures will remain unchanged. "Under current rules the transport part should be taxed as part of the overall package on the profit margin and there would be no change to this arrangement under the proposal," the FT quoted the Commission as announcing.

However, Ms Shanley remained unconvinced, maintaining that the UK will be worst affected by the new rules. “It is no coincidence that Britain led the way with budget airlines and therefore it is no coincidence that Britain will suffer most if this European Commission inspired proposal is adopted."

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