Tourism policy fails to address problem of TOMS, says ETOA

A new tourism policy unveiled today by the UK Government has been criticised by incoming tour operators for overlooking an important tax issue.

The European Tour Operators Association said the policy does not address the problem that companies based in the UK, selling holidays to the UK, are unfairly penalised by the Tour Operators’ Margin Scheme (TOMS).

Tour operators based in Britain are taxed under the TOMS, which is applied to the margin between the cost of the components and the price charged to the consumer.

“This margin is not profit,” explained ETOA. “It contains everything not directly supplied by another company. All in-house supplies and all staffing are taxed under TOMS, as are agents’ commissions, marketing, sales costs. These expenses are the process of adding value.

“TOMS is thus a levy on the investment made in order to assemble, sell and deliver visitors to the UK. For a long-haul operator, it is equivalent to a corporation tax of 800%.”

Companies based outside the EU do not pay TOMS.

“Thus, nearly all incoming operators that sell to consumers are now based off-shore.”

ETOA said that the tax is also unfair because all non-EU holidays sold in the UK (say, to Turkey or to Florida) are untaxed.

“For a UK based company it is overwhelmingly more sensible to invest in selling non-European holidays, than to try and sell a UK holiday to a visitor,” it said.

“This not a problem to do with the level of VAT, but the way in which it is applied to exports. We desperately need to attract visitors to this country. But the process of doing so is subjected to a punitive level of taxation.”

ETOA executive director Tom Jenkins added: “If the Government is serious about encouraging more people to come here, he needs to go to Brussels and convince the other member states to reform TOMS because there is a massive disincentive on EU-based companies promoting EU-based holidays.”

By Bev Fearis