As many as 96% of UK-based travel wholesalers and inbound tour operators are facing severe damage to their businesses, following a recent European Court of Justice (ECJ) ruling.
The European Tour Operators Association (Etoa) said the ruling on September 26 last year has meant the Tour Operators Margins Scheme (Toms) must now be applied to business to business transactions.
As a result, not only will wholesalers and operators have to account for taxation on a transaction-by-transaction basis, but they will also be obliged to reveal their gross margins to their clients.
And Etoa is warning that as the changes place an “acute competitive and bureaucratic burden” on any business caught by the tax, up to 50% of its members that it surveyed may now have to relocate overseas in order to avoid the punitive measures which their European competitors will escape.
Furthermore, the ruling will apply VAT to all tourism exports including any packages in which a UK holiday is sold through a third party or any sale of a European package to a business based in most of the important origin markets, including, China, India and the USA.
"It inadvertently delivers a devastating blow to growth businesses working in growth markets. It is hallmarked ‘industrial catastrophe’"
Etoa argued that” it makes the UK less competitive, it makes selling the UK less competitive and it makes the UK less competitive as a base for doing tourism business.”
Etoa chief executive Tom Jenkins added: “The ruling is an attack on the process of adding value to tourism services.
“It inadvertently delivers a devastating blow to growth businesses working in growth markets. It is hallmarked ‘industrial catastrophe’.
“But how the ruling is implemented lies in the hands of the government.
“This taxation scheme (Toms) is in dire need of reform: one of the shocking aspects of this judgement is that it grants tax free status to foreign holidays, whilst landing a new and substantial tax on our tourism exports.
“So what is alarming is not just the savagery of what is proposed, but its stupidity. Reform has to be on the agenda before implementation.”