Estonia, EU – Baltic States, Legislation, Taxation, Tourism

Currently the VAT on accommodation services is 9% and the government coalition plans to abolish that tax exception and set the regular 20% VAT on them.

ETCU secretary general Kristen Lahtein explained that accommodation forms a very large part of a travel package, and a steep rise in prices may terminate the activities of many accommodation establishments and tour operators and halt further investments in the tourism sector.

"It will hit hardest the companies operating in rural and remote areas, where tourism is, for many, the only employer and source of livelihood. It Tallinn they will perhaps manage, but not elsewhere, and the efforts made in recent decades to get the tourists to visit elsewhere than the capital city become meaningless – only the capital will remain on the map of Estonia as a famous tourist country, if even this," added Lahtein.

She noted that 24 of the 27 Member States of the European Union have a reduced rate of VAT on accommodation services. However, if Estonia decides to act on the contrary, it will belong in a few years time among the five countries with the highest tourist tax.

Lahtein gave the example that Latvia and Lithuania increased the tax rate on accommodation, but realized the mistake and turned back to that decision.

The tourism sector provides 13.67% of the Estonian gross domestic product. It accounts for 27% of services exports an 8% of total exports.