HOTREC and some of its activities VAT and

HOTREC and some of its activities VAT and smoking Dániel Makay Policy Advisor, HOTREC Zagreb, 22 November 2010 1

Contents I. Brief introduction to HOTREC II. VAT III. Smoking IV. Conclusions Zagreb, 22 November 2010 2

Brief introduction to HOTREC Ø Represents hospitality industry at European level Ø 40 National Associations Ø in 24 European countries Zagreb, 22 November 2010 3

Brief introduction to HOTREC European hospitality sector in the EU-27 § 1, 7 million enterprises (mainly micro enterprises) § 9, 5 million persons employed Automotive production: 2, 2 million Chemical industry: 1, 9 million § 195 billion EUR value added Automotive production: 155 billion EUR Chemical sector: 194 billion EUR Zagreb, 22 November 2010 4

Brief introduction to HOTREC What do we do? § Monitor EU developments of likely impact on the sector § Coordinate Members’ views § Lobby Institutions - Commission - European Parliament - Council of Ministers Zagreb, 22 November 2010 5

Brief introduction to HOTREC Why is this work important? § More than 80% of national legislation is made by the EU § Important to influence the law making process at the source, before being transposed at national level § Important role of national associations in contacting their MEPs and governments as well Zagreb, 22 November 2010 6

Brief introduction to HOTREC Some of many issues: § VAT § Smoking § Food labelling § Hotel classification § Quality § Fire safety §. . . Zagreb, 22 November 2010 7

VAT Background: VAT in general in the EU: (Directive 2006/112/EC) § 1 standard rate of not less than 15% § 1 or 2 reduced VAT rates of not less than 5% The reduced rates can be applied to the products and services listed in Annex III of the Directive (incl. accommodation and restaurant services) Zagreb, 22 November 2010 8

VAT Background: VAT on accommodation and restaurant services Before 1 June 09: Ø Hotels: option: - standard rate (≥ 15%) - reduced rate (≥ 5%) Ø Restaurants: in principle standard rate…except if already reduced rate before Jan 91 or negotiated in accession treaties (in total 11 countries) After 1 June 09: all Member States allowed to apply reduced VAT rate ALSO to restaurant services (incl. all beverages)! Zagreb, 22 November 2010 9

VAT Background: Future Commission to launch broad debate on ”reforming” the EU VAT regime still this year Legislative proposal not expected before end 2011 or 2012 To be watched very carefully! Zagreb, 22 November 2010 10

VAT Background: • Since 1 June 2009 3 countries introduced reduced VAT rate for restaurant services: ü France ü Belgium ü Finland • Under consideration in some other countries Zagreb, 22 November 2010

VAT – Rates for hotels Zagreb, 22 November 2010 12

VAT – Reduced rate for hotels Zagreb, 22 November 2010 13

VAT – Rates for restaurants Zagreb, 22 November 2010 14

VAT – Reduced rate for restaurants Zagreb, 22 November 2010 15

VAT France Change of VAT rate for restaurant services • Before 1 July 2009: Ø 19, 6% on all restaurant services: • After 1 July 2009: ü 5, 5% on food and non-alcoholic beverages Ø 19, 6% on alcoholic beverages remains Zagreb, 22 November 2010

VAT France Background • Long time promise of many governments to lower VAT for restaurant services • Possible only following the agreement at EU level • Main aim: all should benefit ü Consumers ü Employees ü Restaurant owners Zagreb, 22 November 2010

VAT France Some results • Cut of prices by majority of establishments • Almost 30. 000 more employees after 1 year • 4 types of hospitality jobs among 15 most popular jobs • 14% of all recruitement in the hospitality sector • Wages up by more than 3% • More restaurant business established than in the rest of the economy Zagreb, 22 November 2010

VAT Belgium Change of VAT rate for restaurant services • Before 1 January 2010: Ø 21% on all restaurant services • After 1 January 2010: ü 12% on food Ø 21% on non-alcoholic and alcoholic beverages Zagreb, 22 November 2010

VAT Belgium First results possible to see so far • Number of backrupcies decreased • Employment situation is stabilised • Turnover increased by almost 7% in 1 st quarter of 2010 • Many technicalities still to be clarified Zagreb, 22 November 2010

VAT Finland Change of VAT rate for restaurant services • Before 1 July 2010: Ø 22% on all restaurant services • After 1 July 2010: ü 13% on food and non-alcoholic beverages Ø 23% on alcoholic beverages Zagreb, 22 November 2010

VAT Finland First results • Prices reduced by 5, 7% so far (close to 6, 6% compared to 100% participation) • Turnover increased by 4, 5% Zagreb, 22 November 2010

VAT Germany - hotels Results of the VAT reduction from 19 to 7% on rooms (1 January 2010): • 717, 6 Millions modernisation of Euros spent on renovation, • 5. 747 additional jobs out of which 2. 150 full-time jobs • 32, 2% of establishments have reduced their prices by an average of 6, 5% • 29, 2 Millions of Euros to increase wages, • 12, 8 Millions of Euros for training Zagreb, 22 November 2010

VAT Latvia - hotels Results of the VAT reduction from 21 to 10% (1 May 2010): • 6. 000 more persons employed • Turnover increased by 5% • Additional social and income taxes of ca. 21 -26 millions EUR VAT increase in 2009 from 5% to 21% • 12. 000 fewer persons employed • Decline in social and income taxes of 14 million EUR Zagreb, 22 November 2010

VAT Arguments - Summary Why a reduced VAT for restaurant services? • Lower prices • High price elasticity • Job creation • Reduction of illegal work • Bringing people into employment Zagreb, 22 November 2010

VAT Arguments - Summary • More resources for training • Investments in the sector: other sectors benefit as well • Modernisation of the establishments • Promotion of culinary heritage Croatia and all EU Member States should make use of the benefits of a reduced VAT rate applied to restaurant services! Zagreb, 22 November 2010

Smoking EU policies against smoking At European level developments related to smoking are linked to activities of World Health Organization • WHO adopted anti-tobacco Treaty in 2003: Framework Convention on Tobacco Control (FCTC) • Ratified by all EU Member States but Czech Republic • Croatia ratified in 2008 • No EU legislation on smoking so far, but increasing pressure (e. g. DG Sanco, Health NGOs) Zagreb, 22 November 2010

Smoking EU initiatives against smoking 1) Council Recommendation on smoke-free environments adopted on 30 November 2009 (AT, SK, CZ abstained) • Objective: to incite Member States to comply with their legal obligations stemming from the WHO anti-tobacco Treaty (Art. 8: protection from tobacco smoke) • A non-binding measure but can put political pressure on those Member States without total smoking bans! Zagreb, 22 November 2010

Smoking EU initiatives against smoking 1) Council Recommendation on smoke-free environments • Calls on Member States to adopt within 3 years (2012) “Comprehensive legislative measures” against smoking - i. e. smoking bans (without any exception) in all indoor public places, workplaces, etc. - Legislation may cover “outdoor” or “quasi-outdoor” public places “where appropriate”… Zagreb, 22 November 2010

Smoking EU initiatives against smoking 1) Council Recommendation on smoke-free environments • Member States to inform the Commission of legislative or other actions taken in response to Recommendation • Possible impact on hospitality: Member States to revise and extend the scope of smoking bans (hotel rooms, terraces, etc. )? Possible implementation at national level to be followed very carefully! Zagreb, 22 November 2010

Smoking EU initiatives against smoking 2) Initiative by DG Employment • Consultation on possible EU action to protect workers from passive smoking • Still ongoing • Outcome very uncertain Also to be followed carefully! Zagreb, 22 November 2010

Smoking (cont’d) Smoking bans at national level Constant trend towards stricter smoking bans • Total bans on smoking in all enclosed public places including bars and restaurants: Ireland, UK, Cyprus, Finland • Smoking bans allowing for special enclosed smoking rooms: Italy, Malta, Sweden, Slovenia, the Netherlands: • Smoking allowed in smaller establishments: Austria, Denmark, Romania, most German Länder, Legislation changes constatly in many countries! Zagreb, 22 November 2010

Smoking (cont’d) HOTREC and EU initiatives against smoking The position of HOTREC • In view of recent legislative developments in the various Member States regarding smoking rules EU action is not needed and it could also interfere with national legislation “HOTREC is of the opinion that the issue of smoking in public and work places is best tackled at national level, where local and practical conditions can be better taken into account” Zagreb, 22 November 2010

Conclusions National associations and HOTREC The Future § Areas dealt with by EU institutions is ever increasing § An ever increasing number of countries § Importance of strong lobby § Importance of close collaboration § Importance of exchange of experiences § Importance of being together! Zagreb, 22 November 2010 34

Thank you very much for your attention! www. hotrec. eu Zagreb, 22 November 2010 35