NL Times Exclusive
Amsterdam, 5 September 2024 – The Dutch government’s proposal to elevate the Value Added Tax (VAT) rate on hotel accommodations from 9% to 21% has been met with stern criticism from financial institution ABN Amro. The bank has labeled the measure as not well thought out and warned that it is unlikely to yield the expected increase in tax revenue, while posing significant risks to the hotel and broader tourism sectors.
ABN Amro’s Analysis
The Dutch government anticipates that the VAT hike will yield an additional 1.212 billion euros in tax revenue, with 910 million euros expected from hotels and guesthouses, and an additional 302 million euros from other accommodation providers. This projection is based on Statistics Netherlands’ (CBS) figures indicating that hotels generated an operating income of 6.8 billion euros in 2022.
ABN Amro, however, disputes this assumption. The bank points out that only 34.8% of hotel turnover will be subject to the increased VAT rate, as it does not apply to business travelers (40% of guests), food and beverage sales (36% of turnover), and other services (6% of turnover). Consequently, the VAT increase is expected to generate only 285 million euros in additional tax revenue, far less than the government’s forecast.
Impact on the Hotel Industry
ABN Amro also predicts that the VAT increase will lead to a reduction in overnight stays due to higher accommodation costs. This could result in hotels and other accommodation providers becoming loss-making entities. For hotels, the potential loss of profit tax revenue is substantial—147 million euros, a significant blow to the government’s coffers.
The bank emphasizes that the consequences of the VAT increase are even more severe for other accommodation providers, particularly in border provinces where they compete with cheaper alternatives from neighboring countries. This could lead to an additional 111 million euros loss in corporate tax income for the government.
Impact on Local Economies and Tourism
The VAT increase could also result in a decline in tourist tax revenue for local governments, particularly in border provinces. The reduction in tourist spending is expected to affect local businesses, including suppliers, restaurants, cultural institutions, craft shops, and public transport companies.
Conclusion
ABN Amro’s analysis suggests that the Dutch government’s plan to raise the VAT rate on hotel accommodations is not well-considered and may have unintended negative consequences. The bank warns that the measure could lead to reduced profitability in the hotel industry, increased costs, and a broader impact on the tourism and hospitality sectors, potentially leading to a loss of tax revenue rather than the intended gain.
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