Sun setting on Latvia’s hotel business?2008-12-15
The Latvian government has supported a plan to drastically increase VAT from 5 percent to 21 percent for hotel services, effective from 1 January 2009. The Latvian Hotel and Restaurant Association’s president, Juris Zudovs, says that this decision will cripple recently opened hotels because they are the ones most likely to have outstanding debt commitments. Twenty new hotels opened in Riga in 2007; this year 10 new hotels. Zudovs says that the hotel industry contributes 8 percent of the country’s gross domestic product and that the VAT changes will harm the Latvian economy. Europa Royale Riga Director Janis Jenzis says that the tourism industry cannot afford to increase prices for hotel services. Hotels and travel agencies will now have to find a way to cover the difference between the previous and new VAT rates, since many contracts for 2009 were signed already during the summer.
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