EU Agrees to Hike VAT on Airbnb, Uber After Estonia Drops Veto
Sign up for Global Macro Playbook: Stay ahead of the curve on global macro trends.
The European Union has reached an agreement to reform VAT rules that will impose tax hikes on online platforms offering short-term rentals and ridesharing services, such as Airbnb and Uber, reports Euronews. This comes after Estonia, home to ride-sharing app Bolt, dropped its opposition to the proposal.
Estonia had previously blocked the reform, citing concerns about unfair treatment of online platforms and the often small-scale suppliers that use them. However, a redrafted text including a longer transition period and a more flexible regime for exempting small businesses seems to have addressed Estonia's concerns.
"After thorough and constructive discussions, and in the spirit of compromise, Estonia can support the latest ViDA [VAT in the digital age] proposals," the Estonian finance ministry said in a statement to Euronews.
The new rules will make online platforms directly responsible for registering for VAT, rather than relying on their users, drivers, and landlords to do so. This change aims to address concerns that online services are slipping through the VAT net, creating unfair competition for traditional businesses that already charge the tax.
The European Commission initially proposed these changes in December 2022, but the reform has faced significant obstacles, with any of the EU's 27 member states possessing veto power.
Lobbyists for the conventional hotel industry have argued that they face unfair competition from digital rivals, while Bolt has countered that many small-scale taxi drivers are not liable to pay VAT anyway.
The European Holiday Homes Association (EHHA), representing companies like Airbnb and Vrbo, has criticized the agreement, calling it a "solution in search of a problem." The EHHA argues that the new law will disadvantage services sold through platforms, lead to double taxation, hurt private providers, and raise prices across the travel sector.
The agreement in principle, announced on X by the Hungarian EU Presidency, paves the way for finance ministers to formally endorse the measures at a meeting next Tuesday.
This agreement represents another step in Brussels' efforts to regulate digital services, following a March deal to improve labor rights for platform workers.