TALLINN - The government has entered a tussle with travel agencies over whether the latter's commissions are liable to value-added tax pursuant to European Union regulations.
The daily Eesti Paevaleht reported that if the 18-percent VAT were imposed on travel agencies' commissions, clients would have to pay an average of 40 kroons (2.56 euros) more per Estonian Air return tickets.
"Finance Ministry officials find the tax must be applied under the new value-added tax act. The Tax Board is keeping silent for the time being," said Juri Tamm, MP and former managing director of Hermann Reisid (Hermann Travel).
Since the debate is taking place throughout EU countries, the ministry is watching the situation closely, Tamm said. However, the state should not wait for instructions from Europe but work to defend Estonia's competitiveness and businessmen's interests, he said.
The Association of Estonian Travel Agencies has set up a working group to solve the problem. The association said its difference of opinion with the Finance Ministry involves the taxation of travel services for sea and air tickets.
But the ministry has said that since travel agencies are working in their own name the commissions must be taxed under a special scheme. Ticket sales can be at the zero rate only if the client is another country's taxpayer. The same applies to travel to destinations outside the European Union.
Enn Vilgo, head of the association's working group, said Finland, Sweden, Latvia and Lithuania do not tax the commission, and so taxation would make Estonian travel agencies' services significantly less competitive than those of their colleagues in the same region.