The European hotel and restaurant lobby, Hotrec, is continuing to fight for a better tax deal for the hospitality sector. It wants a mandatory reduced VAT rate across the European Union, as close as possible to the minimum reduced rate, to the services provided by hotels, restaurants, cafés and similar establishments. It also wants the right to deduct VAT in full on hotel and restaurant expenses incurred for business purposes in all Member States.

Despite the notorious difficulty of winning consensus on tax matters at EU level, Hotrec remains optimistic. Following the October 2001 European Commission report on the scope of the reduced VAT rates for labour-intensive services, and pending a follow-up report at the end of 2002 on the experiment of reduced VAT rates (which "should be followed in 2003 or 2004 by measures permitting a final decision on the VAT rates on such services", projects Hotrec), there is now more chance that the proposals will get through, it forecasts, pinning its faith partly on the impact of the introduction of the Euro.

European tourism competitiveness compared to third countries would be helped by a reduction in the rate of VAT, and in the long term, a VAT reduction would not reduce state revenue, Hotrec argues. It also wants an end to the competitive inequalities between member states, resulting from the current divergence of national VAT rates. "All these arguments should lead the European institutions and member states to respond favourably to HOTREC’s demands", it says.

Hotrec has forged an alliance with the tourism and hospitality trade union, EFFAT, in its bid – with a shared argument that VAT rates have a direct impact on employment in the sector. The two organisations maintain that restaurant services should be included in the labour-intensive services for lower VAT rates, because they meet all the criteria for such recognition. They also suggest that lower rates would reduce illegal labour.

The hotel and restaurant sector draws some solace from the resolution on tourism adopted by the European Parliament in May, which calls on the Commission "to draw up at the earliest opportunity proposals to include the restaurant sector… on the list of sectors of activity entitled to a permanent reduction in the VAT rate, so as to boost employment and modernisation in the industries concerned and make European tourism better equipped to deal with international competition". And it points to another European Parliament Resolution of 13 June (on the Commission Communication "Sustaining the commitments, increasing the pace") which calls on the Commission "to apply the experimental VAT-reduction measures across the board to all labour-intensive businesses and to study the impact on undeclared work of a reduction in VAT".

Just how tough Hotrec’s task is may be judged from the European Commission’s recent description of French government plans to cut VAT on catering services, as a "flagrant violation" of EU rules. France’s President Jacques Chirac included in his electoral promises a cut from 19.6% to 5.5% in VAT on catering services from the beginning of next year. Seven member states (Austria, Spain, Ireland, Italy, Luxembourg, the Netherlands and Portugal) have been granted derogations from EU rules and apply reduced rates of VAT to catering, under a 1992 agreement which aims to harmonise European rates. But a unanimous decision by all EU member states would be needed to approve any further derogations. A small ray of hope can, however, be inferred from European Taxation Commissioner Frits Bolkestein indication that the French request will be examined in the context of a more general Commission review of reduced rates of VAT over the first half of 2003, the prelude to a possible reform of Community legislation on VAT.



Bendt Bendtsen, the Danish minister for economic and business affairs, set out the EU Presidency programme for the maritime sector when he addressed the European Parliament transport committee in Brussels yesterday. He focused on the need for modern and integrated transport systems, with open markets and equal competition conditions. But he also spoke of improved passenger safety and of facilitating maritime transport to and from Europe through new maritime agreements with India and China.

What he termed the "important issues" for the next six months, while Denmark is in the EU chair, include specific stability requirements for ro-ro passenger ships, an update to safety rules and standards for passenger ships ("all the more so in light of the forthcoming EU enlargement, which will increase the importance of safety at sea", he said), a ban on organotin compounds – poisonous paint – on ships (which the Commission has just decided to propose), setting up the committee on safe seas and prevention of pollution from ships, and EU membership of the International Maritime Organisation (which he hoped to complete by the end of the Presidency). During the Danish presidency the Council will have to decide whether to sign a draft agreement on maritime transport with China, and he indicated that here too he would be looking for progress before the end of the year – so as to provide "a good point of departure for future shipping between EU and China".

His emphasis was on a pragmatic approach. For instance he recognised it could be technically and economically burdensome to increase the stability of existing vessels, and he suggested it would be disproportionate to require existing ships on protected domestic seaways to comply with the same regulations as international shipping.



The tourism committee of the Organisation for Economic Cooperation and Development is meeting in Paris today and tomorrow, 11-12 July. In addition to internal matters such as election of officers and agreement on a programme of work and budget for 2003-2004, the meeting is reviewing an OECD secretariat report on trends and innovations in tourism policies (a preliminary to a forthcoming OECD publication), and will examine in detail the national tourism policies of Korea and Japan. The European Commission is also providing an update on developments in tourism policy within the European Union.

The consequences for tourism activity and policy in the post-September 11 situation are inevitably on the agenda, and the Committee is scheduled to discuss the policy implications for the tourism industry. It will invite national tourism authorities to reflect on strategies for managing the crisis in tourism and measures to be put in place in the longer term – such as research, vocational training, information, monitoring and analysis, and systems of support for the tourism sector in the event of a crisis. The United States and Greece are presenting case studies of their experience.

Other matters discussed will include restructuring in the sector (OECD is contemplating a study on the subject), sustainable development and tourism, developing human resources in tourism, improving the effectiveness of national tourism offices, tourism and the negotiations on liberalisation of services in the World Trade Organisation, and information and statistical analysis for tourism policy. And Australia is to present outline of the impact on tourism of the public liability insurance increases the country has recently experienced.


Aviation safety was at the top of the agenda of European Transport Commissioner Loyola de Palacio when she addressed the European Parliament transport committee in Brussels today – and she focused on the continuing gulf between EU ministers and the Parliament on issues such as financing of additional safety measures, checks on staff, and whether inspections of airports should be announced in advance. Recent inter-institutional consultations had failed to reach much agreement, she observed, and the formal conciliation procedure to find a compromise will not begin until 19 September – more than a year after the tragedy that triggered the EU initiative to tighten up on security. And on the Single Sky proposal, she said: "we are the moment that is politically right to act, and not to continue theoretical debates".

On access to port services, where agreement was reached among ministers during June (even on contentious areas such as cargo handling and technical services), she said she hoped for rapid approval by the Parliament. But in an aside, she rejected attempts to impose unilateral controls on ports in the name of security and thus fragment the EU single market – which, she suggested, the US was attempting to do. She was also cautiously optimistic over the prospects for rapid adoption of the new EU rules on safety norms for passenger vessels.

On railways, she urged the Parliament to be "ambitious and decisive" in its treatment of the draft railway package, and – like the Danish Presidency – was hopeful of an agreement before the end of the year.

Upcoming Commission proposals she highlighted included charging for transport infrastructure – where a more detailed methodology for calculations will be provided in early autumn by the Commission, alongside a proposal for interoperable telecharging systems on the TENS road network. And on safety in tunnels, a new draft directive will emerge in the autumn covering all tunnels longer than 500 metres on the TENS road network, setting out clear responsibilities for safety, and relating to technical equipment, traffic norms, training, and information.

Looking ahead to the Commission’s strategic plan for transport for 2003, the Commissioner evoked the key themes of EU enlargement (and in particular consolidation of transport connections, as well as road haulage cabotage in the wider Europe), security (including putting into action the new maritime and aviation safety agencies), and sustainability (in balance with the search for a competitive single market). She also pointed out that transport-related matters accounted for 10% of the Commission’s global programme in 2001 and 2002, representing 15% of the legislation that Parliament was a co-author of, and with a budget of more than Euro 800 million.

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