KHN appeals to Lower House: keep the low VAT rate for accommodation!

Koninklijke Horeca Nederland (KHN) is making an urgent appeal to the Lower House to keep the current VAT rate for accommodation. An amendment, tabled by Pieter Omtzigt (NSC) and co-signed by MPs Pieter Grinwis (ChristenUnie), Mahir Alkaya (SP), and Chris Stoffer (SGP), proposes that the reduced rate in turnover tax should expire from 1 July 2024, increasing the rate from 9% to 21%. Increasing the VAT rate from 12% will deal another blow to the sector - which is yet to recover from COVID-19 - that it cannot sustain.

The hotel sector has been severely affected since the COVID-19 pandemic and is still struggling to recover. Moreover, hoteliers have faced labour shortages, inflation and rising energy costs. An abrupt VAT hike to 21% will increase prices for hotel stays by 12%, resulting in significantly reduced demand. KHN therefore urges the Lower House to critically examine the consequences of a possible increase before taking decisions that could hugely harm the hotel sector and other related industries.

Hoteliers anticipate that international parties (who cannot offset VAT) and guests will not be willing to suddenly pay 12% more for a hotel stay. Price elasticity is already under such pressure that a price increase will inevitably lead to reduced demand for overnight stays. Moreover, hoteliers risk having to absorb part of the increase themselves, which will further erode already fragile margins. This could lead to business closures, bankruptcies and reduced employment. This is unfortunately not considered by MPs. These possible consequences are now being further developed by KHN in an impact analysis.

VAT rates in surrounding countries are significantly lower. A VAT increase will therefore harm the competitive position of the Dutch hotel sector abroad, which will be detrimental to the Netherlands as a destination for holidays, meetings and conferences. This will also affect other sectors where (international) hotel guests spend their money, such as hospitality, transport, aviation, culture, museums, retail and more.

In addition, real estate investors have invested in the hotel sector based on the current low VAT rate. Changing this will affect their returns and damage their trust in the government, which - based on the principle of a trustworthy government - has a duty of care towards these investors.

KHN stressed that hospitality and accommodation should remain accessible to the general public. It is socially undesirable that a hotel stay will soon only be feasible for the rich due to a forced price increase of 12%.

Report reviewing reduced VAT rate

In a report by Dialogic, commissioned by the Ministry of Finance, dated 3 April 2023, states that lower VAT rates could theoretically lead to lower prices for consumers and/or higher margins for producers. In doing so, they indicate that the reduced VAT rate could lead to stimulating (international) tourism and supporting the tourism sector.

KHN president Marijke Vuik: "With the elections approaching, MPs are more concerned than ever with the future of the Netherlands. However, raising money in a way that puts severe pressure on the hotel sector and ultimately has to be paid for by consumers is undesirable and unwise. The effects on the hospitality sector have not been sufficiently considered. We call on the Lower House to fulfil their duty of care and maintain the current rate."