‘’The hotels are basically told that: ‘’it’s fine if you are too expensive, you don’t have to be more competitive, because we will simply jack up the prices of everything else’’’’. -Frederick
What is the new law
In an attempt to make the competition more fair for traditional touristic bussinesses such as hotels and chauffeured car transport, the EU (European Union) decided that online platforms with short term rentals such as AirBnB, Bolt and Uber, will pay VAT (value added tax). The online platforms have until 2030, to start charging theirs clients, the additional VAT, which could reach up to 25%.
The reasons behind it: too good to be true
According to the EU, this decision could promote more sustainable tourism and solve the housing issue that many cities face, because of AirBnB. Because of the added tax that customers will have to pay, it could turn loyal AirBnB clients, towards hotels. This means that many appartment owners, will turn back to renting their appartment all year long, providing back to the market, appartments for rent.
The law whatsoever, did not pass without its difficulties. For an international law to pass, all 27 countries must give their consencous, but Estonia put up a strong resistence. The reason behind this, is that Estonia is the home of Bolt, one of the ride-sharing companies that would be heavily affected by this measure.
What’s the catch?
Nevertheless, all the above sound ideallistic, but, is that the real reason the EU passed such a law? The VAT, is a valuable source of money for every country. Every year, around 1 trillion is collected by the member states of the EU by the VAT alone. So, it is evident why the countries would be delighted to add an additional player to this income.
But, what does the EU win out of this situation? Every year, a small part of the VAT that each country gathers, must be given to the collective budget of the EU. The percentage that the EU gets is stable: 0,3%. The VAT can vary from product to product and from country to country, going from 10% to 27%, but the percentage that goes to the EU’s collective budget is always stable. In 2023, the EU received 22 billion from the VAT that the 27 country members collected.
Now, this new law, is calculated to bring around 6 billion to the country memers of the EU, and of course, 0,3% of this profit will got to the EU. This means 1,8 million will be added to the annual collective budget.
Why not the other way round
‘’I don’t like the idea of putting taxes on bussinesses that have more innovation that the existing ones. Why would you deliberately raise prices for consumers? Why not just lower the taxation of the other bussinesses to make them more compatitive?’’
That’s what Frederick told us, after we explained to him what this new law was. Frederick is a young guy of German origin, working in the stock market, with basic knowledge of how the market works.
The money trail
Now the question that remains is one: why did the EU not think of reducing the taxes on these traditional bussinesses to make the competition more fair? The answers can always be found by following the money trail which points to the profit. By adding the VAT on online platforms, the profit is too good too pass on and so, in the end, it’s the consumers, that will have to, once again, pay for it.
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[Frederick’s interview bellow]
