THE Cyprus Tourism Organisation (CTO) is concerned that an EU-imposed 17.5 per cent VAT on tour operators’ profit margins will prove a disincentive to some of them to sell Cyprus this year.
According to reports, the tour operators margin scheme (TOMS) will come into force from May 1, upping the cost of a holiday to Cyprus by between £10 and £15 per person. The fact that many holiday brochures have already been printed without the extra tax means the operators will have to absorb the cost themselves.
“This will, of course, erode their profits and it will be a disincentive on their behalf to sell Cyprus,” said the CTO’s Director of Tourism, Lefkos Phylactides. “We have alerted the government to this,” he added.
TOMS was introduced by the EU to stop tour operators reclaiming VAT on any of the component costs of a package, such as accommodation or transport, requiring them to account for VAT on the profit margin. It applies to all EU acceding countries.
Phylactides said this did not mean a 17.5 per cent increase in the cost of an overall holiday, but it would add between £10 and £15 to a package. “The VAT will be imposed only on the component of the package relating to accommodation,” he said.
He said he was not sure how many operators had failed to include TOMS in this year’s brochures, although the issue had been around for more than a year. “The fact that Cyprus would be joining the EU was well known,” he said.
Yiannis Efthyimiou, general secretary of the Association of Greek Cypriot Tour Operators (AGTA) in the UK said it was not clear how many operators had prepared for TOMS in this year’s brochures. Operators usually print their brochures nearly a year in advance. “Many were well aware and had provided for it, if not in their first edition then at least in their second or third ones,” he said. “The bottom line of course is that it will make the tourist package dearer, but it’s not a new thing. It was well known.”
He agreed that Cyprus was already an expensive destination in the region but said it was not the only one.
Efthymiou said what was more worrying was the general situation in the wake of the terrorist attack in Madrid last week. “The market is facing a slump and Cyprus will be affected because of the attack in Spain,” he said. “The general message is that the market is already affected and people are going to want to stay home. It’s an iffy climate at the moment.”
Efthymiou said that in January bookings to Cyprus were up 25-30 per cent over the same month last year, but pointed out that January 2003 had suffered badly due to the looming war in Iraq.
