The second focus of this initiative addresses the taxation of passenger transport. Currently, VAT in this sector is calculated based on the distance traveled within the European Union, which creates significant bureaucratic complications, especially for SMEs operating cross-border routes. Each segment of a journey requires declarations in different countries, under heterogeneous tax rules that hinder compliance. Additionally, this situation favors modes such as international air transport, which is exempt from VAT, to the detriment of more sustainable options such as land or rail transport—contradicting the objectives of the European Green Deal.
The European Commission emphasizes that modernizing these rules is essential not only to promote fair competition but also to reduce administrative burdens and align taxation with the EU’s sustainability and digitalization goals outlined in its strategic agenda. Tourism represents approximately 10% of the EU’s Gross Domestic Product and provides employment to millions of Europeans, particularly within small and medium-sized enterprises that form the backbone of the sector.
Participation in the consultation is open to agencies, transport operators, national tax authorities, and the general public via an online questionnaire accessible through the Commission’s portal. The Commission will collect responses over the three-month period and use them as the basis for drafting the future Directive on Tourism VAT, expected to be presented by the end of 2026.
This debate opens the door to reconsidering fundamental issues such as the harmonization of fiscal treatment for agencies inside and outside the EU and the simplification of VAT based on the actual place of service delivery. Both dimensions are under review with the goal of eliminating unjustified privileges, reducing bureaucracy for small operators, and fostering fairer competition within the European single market.
Strategically, this consultation represents a significant step in the EU’s fiscal agenda. It not only tackles specific issues in the tourism VAT regime but also reflects a broader intention to align the entire tax framework with the digital and environmental transformations driven by climate emergencies and the demands of the 21st century. Moreover, the effort to involve SMEs and citizens in the process reflects a more participatory and collaborative approach to regulatory development.
This public consultation represents a historic opportunity to reform a regulatory framework that Brussels considers outdated and distortionary. The aim is to create a fairer, more efficient, and more sustainable system that enhances the competitiveness of European businesses in a sector vital to the continent’s economy. The opinions, suggestions, and criticisms gathered during this consultation will be key in shaping the legislative proposal, which—if everything proceeds as planned—will be unveiled in 2026.
