Tourismuspolitik Info

Tax heaven for accommodation companies

Under the pretence of public welfare some accommodation companies enjoy tax privileges. The term „non-profit" is used in this context as a status which delivers from a certain kind of taxation within the meaning of the § 55 AO.

This status doesn't say anything whether the company acts „selfless, caricatural or Christian".

The non-profit accommodation companies of welfare organisations have special privileges such as the remission of exemption, corporate tax exemption, VAT-benefits and the authorisation to accept doles. Moreover these companies receive donations from public funds for investments and donations from lottery revenue.

Additionally, many federal states give grants to people for a holiday in these non-profit companies. That means that with the aid of tax money the state is able to support companies not to pay tax.

The competitive advantage for these companies amounts to 20 to 30 % turnover every year.

The assets of these non-profit companies are transferred to sub companies which are profit oriented.

The AWO SANO in Mecklenburg-Western Pomerania is one example for these non profit companies. This company runs health resorts, holiday villages and lately a profit oriented 3-star-hotel, runt by a sub company. The CEO is identical in all the companies. This project cost 5 Million Euro. 49 % of the costs for the construction and constitution were financed by the minister for economic affairs of Mecklenburg-Western Pomerania.

The approved non-profit accommodation companies of welfare organisations have to prove that two third of their guests are indigent. People are indigent when their income lies below the assessment limit which is defined in the § 53 no. 2 AO.

The assessment line for each member of the family is the fourfold of the standard rate of the welfare within the meaning of the § 22 BSHG. For singles or householders the assessment line is the fivefold of the standard rate. That corresponds to 5.177,00 Euro in the western parts of Germany and 4.967,00 Euro in the eastern parts of Germany for a family with 2 adults and 2 children in the age of 15 to 17 years in the year 2005.

Calculation
For people with a bad disability and for people who have completed the 75th year the German legislature estimates the need of help without any further checks. To spend a holiday in the AWO SANO non-profit company in Mecklenburg-Western Pomerania without paying VAT, it is enough when the guests have completed the 60th year of age (women) or the 65th year of age (men). If guests don't fulfil the requirements, they just need medical attestation which attests the need of recovering. These restrictions even allow millionaires over 60 respectively 65 years of age to spend a holiday without paying VAT.

If you summarize these restrictions, there are still 80 % of the populations which are considered to be indigent and exempt from the VAT in the non-profit accommodation companies. That means that the holiday is subsidized even for well paid employees, clerks, freelancer and entrepreneurs in non-profit accommodation companies up to the 4-star-segment.

Even if people can't prove the need of help (well paid members of the German Parliament for example) they can still take a holiday in these establishments, based on the exception that 1/3 of their guests can achieve higher earnings without paying the VAT.

Moreover the non-profit AWO SANO wasn't able to provide evidence of the adherence of the assessment limit. Furthermore the company calculated erroneously with net income. In the booking blank of the AWO Sano gGmbH you could read till recently:" My income exceeds the assessment limit for non-profit accommodation companies. Please, charge the VAT to my account. (Please only mark with a cross if your income lies above the assessment limit.)" At the appending calculation paper you can read:" You can keep this calculation paper or throw it. We don't need it. We ensure that the determinations of the data privacy of the state will be complied in the holiday village Rerik."

Although it is a statutory provision to document all processes, these companies keep their non-profit status.

Who seriously proved the income allegation of the guests in the last years? The revenue office seems to be over challenged. Otherwise they would recognize the gross violation of the non-profit companies.

Thousand of these non-profit companies exist in Germany. They are operated by the "Sozialwerk of the German armed forces" (a part of the German army), "den Häusern der Bauwirtschaft" (a part of the building industry), "dem Bahnsozialwerk", friendly societies and limited companies of the welfare organizations und churches and the "Naturfreundeverein Deutschland" (a society which is committed to safe the nature) for example.

For laities it's impossible to distinguish the non-profit companies and the commercial companies.

The non-profit cure hospitals also open their doors for the tourism. The target audience of these companies are seniors, families, congress tourists, tourist that want to spend their holiday at the sea or the city, Spa-tourists, cultural interested tourists or tourists who like the nature.

The prices for a holiday in the season are mainly so high, that people who are seriously indigent can't afford a holiday in these establishments. Moreover the non-profit companies receive doles. The AWO SANO for example received 500,000 Euro from the lottery income and collected doles for a raffle of a New Year's event.

The non-profit accommodation companies are mainly abdicable because the holiday in many profit oriented companies is even less expensive. But the profit-oriented companies have bad basic conditions in the unequable national and international competition.

An authorized body with the power to interfere and to avoid the dissipation of public funds, in this case the competitive distortion through tax subvention, doesn't exist.

The political parties at federal level know about these problems since many years but they just transfer the debate from one congress to the other. Member of these congresses are also lobbyists of the welfare organisations. But the affected people and commercial economy don't have the chance to be a part of this debate. An enormous tax loss is the result of the deferment. Sometimes the politicians lack to practical relevance.

Entirely the European Commission (the Directorate-General for Taxation and the Customs Union and the Directorate-General for Competition) can force the legislator to obtain a fair competition. It is a pathetic display for the German tax- and tourism policy.

The state, the federal states and the communes support encourage the Non-Transparency and the competitive distortion in Germany but at the same time they complain about the lack of tax revenue and destitute financial capital for people who are seriously indigent. The guests of these non-profit accommodation companies support a growing device of welfare.

The "Bund der Steuerzahler" (alliance of tax payer) describes the situation as follows:

"Subventions are an instrument of policy

The lobbyists know how to enforce some derogations and benefits for themselves and to cover them under the pretence of welfare. These subventions cause an accustoming effect and they are declared as an acquired right and extended even if the reason for their assent is omitted already.

Furthermore the politicians are inclined to pay more attention to factional interests (as a part of their election tactics) than to the interest of the commonality because no pre-election promise is easier to deliver than the "cash blessing" of the State because the taxpayer secure its liquidity.

The system of subsidy and benefit granting has to be reformed. If the State supports cultural, social or ecological projects as an exceptional case, it should banish these funding and shorten its dumps at the same amount. The State has to be forced to integrate the subsidy audit into the annual budget consultations to make the funding accountable and competent."

During the 15th "Steuergewerkschaftstages" the minister of finance explained:" Tax subventions and its exceptions are often inequitable.

Further process is necessary to abolish the subventions in order to achieve an equitable taxation system.

Only a few benefit from the tax benefits, taxation gaps and exceptions at the expense of many.

Further negative consequences are the increasing complexity of the taxation system, the advancing weakening of the taxation base and the distortion of the competition. The financial and personnel capacities could be used more effectively.

The tax policy is orientated on the precept "lower tax rate – fewer exceptions".

If it is like that Mr. Minister of Finance, please adopt the proposal of the federal audit court. In a statement concerning the reduction of tax privileges in November 2008 the federal audit court came out in favour of deletion without substitution for these special provisions concerning the VAT. The consequence would be tax receipts, equitable competition and less bureaucracy.

Baabe, 10.03.2005

Ralf Schlüter

Last update at 24.03.2008
Ralf Schlüter

Last update at 24.03.2008

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