The European Commission has opened a public consultation to overhaul outdated VAT regulations in the travel and tourism sectors, aiming to create fairer competition and reduce administrative burdens for businesses across the EU, including those in Ireland.
The consultation addresses long-standing issues with current VAT rules that have failed to keep pace with digitalisation and modern business practices. Travel and tourism contribute approximately 10% of the EU’s GDP and employ millions of people, predominantly in small and medium enterprises.
The Commission has identified two primary areas requiring reform. First, the special VAT scheme for travel agents currently bases taxation on profit margins and business location, creating inconsistencies that give unfair advantages to operators based outside the EU. This system has become increasingly problematic as online booking platforms have transformed how travel services are sold.
Second, VAT rules for passenger transport services calculate taxes based on the distance travelled within EU borders. This approach places disproportionate administrative burdens on smaller operators and creates inequalities between different transport modes, potentially affecting Irish ferry services, coach operators, and regional airlines.
Member states, businesses, and citizens can participate through an online questionnaire available in all EU languages on the Commission’s “Have Your Say” platform. Stakeholders can also submit detailed position papers outlining their experiences and recommendations for reform.
The 12-week consultation period will include additional discussions with industry representatives and business groups. The Commission emphasises that input from SMEs is particularly valuable, as these businesses often struggle most with complex VAT compliance requirements.
Irish tourism businesses, from small tour operators to larger hospitality groups, stand to benefit from simplified rules that reduce paperwork and create a more level playing field with international competitors. The reforms could particularly impact businesses offering package holidays or those operating cross-border transport services.
The feedback gathered will inform a legislative proposal scheduled for 2026, giving the Commission time to thoroughly assess the impact of any changes on businesses and consumers alike.
For Cork businesses in the tourism sector, this represents an opportunity to influence regulations that directly affect their operations and competitiveness. Those interested in participating can access the consultation through the European Commission’s official website, where additional information on current VAT special schemes is also available.