Digital Services Taxes Designed to Hit Big Tech Revenues Are Being Passed Onto Tour Operators.

In a significant shift that could reshape the economics of the global tourism industry, GetYourGuide, a leading online marketplace for booking tours, activities, and attractions, has announced it will begin passing on the costs of Digital Services Taxes (DSTs) directly to its tour operator partners. This move, confirmed by the company to Skift and set to take effect on October 1st, marks a departure from the original intent of these levies, which were primarily designed to target the substantial revenues generated by multinational technology giants. Instead, the financial burden is now trickling down the supply chain, impacting the very businesses that provide the experiences consumers seek.

The surcharge, the specifics of which are still being finalized and communicated to individual partners, will be applied to cover DSTs that GetYourGuide is obligated to pay in several key European markets: France, Italy, Spain, Turkey, and the United Kingdom. These taxes, often referred to as "Google taxes" or "digital taxes," are national impositions levied on the revenue of large online platforms, search engines, and social media companies that meet certain global revenue thresholds. For instance, in the UK, a company’s digital activities must generate over £500 million globally to be subject to the DST, which is typically a percentage of the revenue derived from these digital services within the country.

The rationale behind DSTs, when they began to emerge in various jurisdictions around the globe, was largely a response to the perceived tax avoidance strategies of Big Tech. Governments argued that these digital behemoths, despite generating significant profits from economic activities within their borders, were often paying disproportionately low amounts of corporate tax due to complex international tax structures and the intangible nature of their digital services. DSTs were conceived as a way to ensure these companies contributed more equitably to the public finances of the countries where they operate and derive value.

However, the implementation of these taxes has proven to be a complex and contentious issue. While the explicit target was the tech giants, the mechanism by which these taxes are levied often falls on the gross revenue generated by the platform, rather than its net profit. This creates an incentive for platforms to seek ways to offset these new costs. In many cases, this has led to a direct or indirect pass-through of the tax burden to the users of these platforms, whether they are consumers or, as in this instance, business partners.

For tour operators, this surcharge represents an unwelcome increase in their operational costs. These businesses, often small and medium-sized enterprises (SMEs) that form the backbone of the tourism sector, operate on relatively thin margins. An additional percentage added to their booking fees can have a significant impact on their profitability, potentially forcing them to absorb the cost themselves, raise their prices to consumers, or reduce their overall offering.

"This is a concerning development for our members," stated Maria Rossi, spokesperson for the European Association of Tour Operators (EATO). "We understand the desire of governments to ensure fair taxation, but these DSTs, intended for global tech giants, are now creating financial pressure on local businesses that are vital to our economies. The pass-through of these costs by platforms like GetYourGuide, while perhaps a business necessity for them, puts our operators in a difficult position. They are already navigating a post-pandemic recovery and facing rising inflation, and now this adds another layer of financial strain."

The specific details of GetYourGuide’s surcharge are still under development, but it is expected to be a percentage of the booking value or a fixed fee applied to each transaction facilitated through the platform. This will vary depending on the market and potentially the type of activity booked. The company has indicated that it is engaging with its partners to explain the rationale and implementation of the new charges.

"We have always strived to be a transparent partner with our operators," a GetYourGuide representative told Skift, speaking on condition of anonymity. "These digital services taxes are a reality of the operating environment in these countries. As a platform, we are compelled to comply with these regulations. Our intention is to ensure that the burden is shared as equitably as possible, and we are working closely with our partners to mitigate the impact and find sustainable solutions."

However, for many tour operators, the notion of "shared burden" is debatable when the primary impact is a direct financial imposition. Giovanni Bianchi, owner of a small vineyard tour company in Tuscany, expressed his frustration. "I pay my taxes here in Italy, I employ local people, and I contribute to the local economy. Now, because a global company is being taxed on its digital revenue, I have to pay more to list my tours on a platform. It feels like I’m being penalized for a tax that was never meant for businesses like mine."

The situation highlights a broader debate about the efficacy and unintended consequences of unilateral DSTs. Many countries have pursued these taxes independently, leading to a fragmented global tax landscape. The Organisation for Economic Co-operation and Development (OECD) has been working on a two-pillar solution to address international tax challenges, including a global minimum tax and a reallocation of taxing rights for large multinational enterprises. However, these reforms are complex and have a long implementation timeline. In the interim, unilateral DSTs continue to create friction and impact businesses across various sectors.

"The OECD framework, particularly Pillar One which aims to reallocate taxing rights for the largest and most profitable multinational enterprises, is designed to address precisely these issues," explained Professor Anya Sharma, an international tax expert at the London School of Economics. "The goal is to move away from these unilateral measures that can lead to double taxation and trade disputes. However, the implementation of Pillar One has faced significant delays, leaving countries to resort to their own measures, like DSTs, which often have ripple effects down the value chain."

The impact of GetYourGuide’s decision could extend beyond the immediate financial costs for tour operators. It could influence how these operators engage with online platforms, potentially leading them to explore alternative distribution channels or to renegotiate terms. It might also prompt a closer examination of the overall value proposition offered by these platforms, especially if the cost of doing business increases significantly.

Furthermore, the move could have implications for consumers. If tour operators are forced to absorb the DST surcharge or pass it on to customers in the form of higher prices, it could make travel and experiences more expensive. This could particularly affect discretionary spending on tourism, which is often sensitive to price changes.

"The tourism sector is incredibly interconnected," noted Dr. David Chen, a tourism economist. "An increase in costs for tour operators can have a cascading effect. It can lead to reduced demand, potentially impacting employment in the sector, and ultimately affecting the overall economic contribution of tourism to destinations. While the intention of DSTs is to increase tax revenue, the indirect costs and economic distortions need careful consideration."

The decision by GetYourGuide is not an isolated incident. Other online platforms operating in jurisdictions with DSTs are likely facing similar pressures and may follow suit in passing on these costs. The travel technology sector, heavily reliant on digital marketplaces, is particularly exposed to these evolving tax landscapes.

The long-term implications of this trend remain to be seen. It underscores the challenges of adapting global tax frameworks to the digital economy and the need for coordinated international efforts. As DSTs continue to evolve and their impacts become clearer, businesses within the tourism ecosystem will need to remain agile and adaptable, while policymakers will face pressure to ensure that tax measures achieve their intended objectives without disproportionately burdening vital industries and the SMEs that comprise them. The current approach, while aiming to tax Big Tech, is inadvertently creating a new set of financial hurdles for the very businesses that bring unique experiences to life for travelers worldwide. The question now is whether this will spur greater adoption of the OECD’s global tax reforms or lead to further fragmentation and unintended economic consequences.