Estonia, Financial Services, Taxation, Tourism

The state received last year approximately the same amount of additional revenue in taxes it seeks to get through the 50% VAT rate hike for accommodation establishments, from 9 to 14%, in 2017, head of the Estonian Hotel and Restaurant Association Verni Loodmaa said.

"Operators of accommodation and catering establishments are for the most part small businessmen. The tax behavior of small businessmen and the whole sector in 2015 was exemplary and the state has received a decent income," he added.

At the same time, the number of foreign tourists decreased and owing to tense competition the average room cost in hotels declined, he observed.

"We predict that the same trend will continue in the first quarter of 2016. In such a situation we'd like to remind the government and the parliament that taxation of a falling market has a paralyzing effect on the business environment, scaring away investment in the first place," Loodmaa said.

The association recommends to delay the VAT rate hike by a couple of years, he said: "Let's see what happens in our principal export markets which today are in a very difficult situation and give entrepreneurs time to adjust to maintaining competitiveness in a falling market."

Accommodation establishments paid 92 million euros in labor taxes and more than 59 million euros in VAT into state coffers in 2015, data of the Tax and Customs Board show. A year earlier the corresponding figures were 82 million euros and 52 million euros, respectively.