Bulgarians will soon be paying more for spending holidays in their own country than the millions of foreigners who visit.
This will happen after Parliament approves a seven per cent value added tax (VAT) rate on hotel accommodations for organised trips. The rest of the holiday makers will be levied 20 per cent VAT on their hotel stay, which is the uniform VAT rate in Bulgaria. As it mostly occurs, though, only foreigners come to this country as part of organised trips: therefore, the alleviation will only apply for them.
Even now foreigners pay less for staying in hotels at the Black Sea coast. They prepay packages of services, including hotel stays of only a few euro for a three-star hotel. Meanwhile, Bulgarian holiday makers are forced to pay more money for exactly the same set of services outside a package.
The unusual discrimination is just one step from becoming a fact after being approved by the parliamentary committee on budget on July 6. Now Parliament only has to vote on it to turn it into an active legislation.
It is not clear yet whether the food sold in hotels will be levied with seven per cent VAT, too. This will be defined in next year’s Budget Act. Before that, the text will be co-ordinated with the European Commission.
Earlier plans by the Finance Ministry envisaged the introduction of the uniform 20 per cent VAT on all tourist services, which was seen by the sector as a serious threat to its further development.
Currently, Bulgaria charges only seven per cent VAT on all tourist services. However, in line with its commitments to the EU, the country will have to raise that rate to 20 per cent, which is the uniform rate for all goods and services in Bulgaria.
The highest VAT charged on tourist services in the EU currently can be found in Italy and Austria, but even these countries it is much lower, at only 10 per cent. Bulgaria’s direct competitors, like Spain and Greece, levy seven and eight percent VAT, respectively. Cyprus and Latvia enjoy the lowest VAT in tourism – only five per cent.
For the past three years, the tourism industry in Bulgaria has developed rapidly, becoming a leading sector in terms of revenue. Figures showed that 2005 international tourism revenues (excluding transport) were about two billion euro, an increase of about nine per cent on the previous year.
Meanwhile, the World Travel and Tourism Council (WTTC), an international organisation of travel industry executives, does not see Bulgaria graduating over the next decade to the ranks of destinations popular among big-spending tourists. This is shown in a research paper that covers 174 countries in the period 2006-2016.
The WTTC anticipates that Bulgaria’s tourism and travel industry will maintain its current growth rate with no major ups or downs.
Bulgaria is ranked 43rd in terms of travel and tourism economy GDP and 105th in terms of the 10-year growth forecast.
Bulgaria is seen as a non-mover over the next decade, continuing to account for three per cent of Central and Eastern Europe total demand.
The WTTC forecasts tourism revenues of $4.57 billion (3.6 billion euro) for Bulgaria in 2006 or 16 per cent of GDP.
The data cited in the research paper suggests that Bulgaria, together with Romania, will continue to be the region’s top destination for budget travellers.
The number of foreign tourist arrivals will double to 12 million by 2016 but that would not result in a significant revenue growth for the industry.
Foreign tourists spend $310 on average during their stay in Bulgaria. That figure is expected to reach only $460 in 10 years, leaving the country trailing badly behind Greece, Turkey and Cyprus.
Investment in the Bulgarian travel and tourism industry will increase gradually from $868 million in 2006 to $1.8 billion in 2016, accounting for 14-17 per cent of overall investment in the country.
