THE
trade has called on the UK Government to stand firm against European Commission
proposals to charge operators VAT on flights within the European Union.

Chancellor
Gordon Brown has vetoed plans by his fellow EU finance ministers to discuss the
secret VAT changes at a meeting tomorrow, after a draft of the new directive
was leaked to the industry last week.

But
if the plan eventually goes ahead, ABTA estimates around 1,000 operators would
be affected at a cost of at least £75 million. This charge would be passed on
to clients adding around £25 per person to the cost of a package holiday.

The
EU wants to harmonise travel industry VAT laws within its borders by
introducing VAT on flights for operators that do not own their own aircraft.

It
plans to introduce the tax by including flights in the Tour Operators Margin
Scheme. Under the scheme, VAT is charged on operators’ gross profit at the rate
applicable in the country where the company is based – 17.5% in the UK.

Further
talks are planned for November but the Treasury has vowed to veto the plan in
its current form.

European
Tour Operators Association executive director Tom Jenkins welcomed the
Government’s intervention, but warned it was “just a stay of execution for
another month”.

“The
industry and the Government are waking up to its repercussions, although the
Government has done nothing for the past two years,” he said.

The
big four would not have to pay the extra VAT because they own their aircraft,
but operators that rely on third-party flying would be lumbered.