ECTAA meets with the Polish Council Presidency and welcomes their commitment to progress on the revision of the special VAT scheme for travel agents.

The Polish Council Presidency has decided to include the revision of the special VAT scheme as one of its priorities of its work programme for the next 6 months. The Council Presidency is keen to achieve progress on a Directive proposal to revise the margin taxation scheme for travel agents, which has been presented by the Commission in 2002 and has not yet found unanimous agreement among Member States.

Undersecretary of State in the Polish Ministry of Finance, Mr. Maciej H. Grabowski, and Undersecretary of State in the Polish Ministry of Sport and Tourism, Ms. Katarzyna Sobierajska, met with a delegation of ECTAA consisting of the Vice Presidents of ECTAA, Mr. Pawel Niewiadomski and Mr. Tomas Olsson, together with the Vice President of the Polish Chamber of Tourism PIT, Mr. Stanislaw Pisko, in Warsaw on 11 July 2011.

This was the opportunity for the industry to recall the importance of revising the special VAT arrangements for travel agents, the so called margin taxation scheme. The current VAT scheme is applied very differently across Europe, is outdated and leads to important distortions of competition in the market for the supply of travel services. Member States’ negotiations on a Directive proposal to overhaul the scheme have failed after 2 years discussions between 2002 and 2003 and the resumption of the talks beginning of 2010 have not yielded any results.

In parallel to the discussions in Council on a revision of the special VAT scheme, the Commission has initiated infringement proceedings against a number of Member States in 2008 and 2009 for the incorrect application of the margin taxation scheme. According to the Commission, the Member States concerned extend the application of the margin scheme beyond what it considers to be the scope of the special scheme.

Said Vice-President of PIT, Stanislaw Pisco: “We have an abnormal situation today, where the
Commission has referred 8 Member States to the European Court of Justice for the incorrect application of the special scheme. This warrants a revision of the Directive.”

A decision from the European Court of Justice on the extended scope of the margin scheme will not be enough to address all the problems that the trade face with the current provisions. It needs a major overhaul. The industry would like to see a flexible approach to the margin scheme, which would allow travel agents which supply to corporate customers to use the normal VAT arrangements, so that the corporate customers can deduct input VAT. The right to input VAT deduction of taxable persons is one of the fundamental principles underpinning the European VAT system.

Said Vice-President of ECTAA and Chairman of the ECTAA Fiscal Committee, Mr. Tomas Olsson: “We are confident that the Polish Council Presidency can achieve progress on a number of issued raised by the industry, such as simplifying the scheme by introducing the concept of a global margin. We are also hopeful that they can advance on the very difficult discussions on the scope of the margin scheme, which has been the most controversial issue of the revision process.”

ECTAA regroups the national associations of travel agents and tour operators of 29 European countries, of which 25 are within the European Union, and represents some 80.000 enterprises.