The Minister of Entrepreneurship Urve Palo replied to the interpellation concerning the raising of the VAT rate on accommodation services (No 10), submitted by Members of the Riigikogu Kersti Sarapuu, Kadri Simson, Mihhail Stalnuhhin, Valeri Korb, Vladimir Velman, Lauri Laasi, Andrei Novikov, Dmitri Dmitrijev, Enn Eesmaa, Tarmo Tamm, Olga Ivanova, Rein Ratas, Jüri Ratas, Martin Repinski, Erki Savisaar, Jaanus Karilaid, Priit Toobal, Aadu Must, Viktor Vassiljev, Siret Kotka, Mihhail Korb, Toomas Vitsut, Mailis Reps and Märt Sults on 30 April.

The interpellators referred to the fact that, at present, the tourism sector constitutes an important part of the Estonian economy, together with indirect impacts it accounts for approximately 7% of the GDP of Estonia. While approximately 6 million foreign tourists visited Estonia in 2013, 1.35 billion euro were spent on tourism services, tourism services accounted for 29% of the export of services, and the share of tourism in total export was nearly 10%. The interpellators wished to know the minister’s position on how she estimated the impact of the raising of the VAT on accommodation services on the tourism sector in Estonia. The interpellators wished to know if Urve Palo as the Minister of Entrepreneurship thought that such a step would be correct.

Palo admitted that taxation issues are vital for this sector. “When planning changes in the tax rates for accommodation, we have to take into account that, in Estonia, the tourism sector competes not only with the Baltic countries, but with the whole Europe,” Palo said. She explained that, also in most of the European Union countries, a lowered VAT rate has been established for establishments providing accommodation in order to improve the competitiveness of the tourism sector. As few as four countries out of 28 do not use this possibility. They are Denmark, Great Britain, Slovakia and Hungary. In other countries this possibility is used.

“As the Minister of Entrepreneurship I did not think it right that the Government would eliminate the VAT differentiation on hotel services, the services of establishments providing accommodation. I think that the compromise that has been made by today – that the differentiation will remain and VAT will rise from the current 9% to 14%, that is, by 5%, which is 6% less than originally planned – is a compromise that can be put up with,” Palo said. She pointed out on the positive side that the change would apply as of 2017 and not the next year. The hotel sector would be able to adjust to the VAT changes for establishments providing accommodation and review its price lists accordingly. This is important because packages are sold approximately a year in advance at international fairs.

In Palo’s words, it had been agreed in the Government that the tourism sector would be granted additional 2 million euro every year as of 2017 which would be targeted at supporting the tourism sector outside Tallinn. Thus the total amount of the support will be 6 million euro which is not at all a small amount – 100 million kroons in the old currency, Palo explained.

In the discussion on the interpellation, in comments, a number of important aspects relating to the impact that the raising of the VAT rate for establishments providing accommodation would have on the tourism economy were pointed out.

The Minister of Rural Affairs Urmas Kruuse replied to the interpellation concerning the situation of milk producers (No 11).

During the open microphone, Mihhail Stalnuhhin and Jüri Adams took the floor.

Riigikogu Press Service

Gunnar Paal, 631 6351, 5190 2837

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