Spain considers ‘crippling’ hotel tax hike

Spain considers ‘crippling’ hotel tax hike

The Spanish government is considering hiking VAT rates on hotels and other services in a move that observers warn could “cripple” tourism in the UK’s largest outbound market.

Spain’s rate of VAT is 18%, but a number of services including hotel stays are subject to a rate of 8% – with some products subject to a super-reduced rate of 4%.

The Spanish finance ministry is assessing whether to reclassify such products to bring them closer in line with its main VAT rate, according to news agency Reuters.

“The ministry is studying reclassifying certain products and services that have reduced or super-reduced VAT,” a spokesman for the ministry said.

The removal of the reduced and super-reduced rates is among recommendations made by the European Commission and the International Monetary Fund (IMF).

The IMF also recommended an increase in the core VAT rate and a reduction in government workers’ pay in an attempt to reduce the country’s budget deficit.

UK operators said any increase in VAT rates on hotel stays would severely damage the country’s tourism industry, with one senior figure saying it would “cripple” Spain’s hotel trade.

Hugh Morgan, managing director of Monarch Travel Group, said: “I understand the government will be looking at ways out of this crisis, but it would kill the goose that lays the golden egg.”

Bill Allen, managing director of On Holiday Group, said it could push some Spanish hoteliers “over the edge” and hit operators reliant on the Spanish market. “If it increased 10%, hotels would be forced to adjust prices and some would not be able to bear that.”

The VAT rate on UK hotel stays is 20%. The hospitality industry has been lobbying for a reduction to 5% to help it compete with other European countries.


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