The Travel Technology Association (Travel Tech), a leading advocate for the travel technology industry, is urging the U.S. government to take action against Global Digital Services Taxes (DSTs). The organization warns that these taxes unfairly burden travel technology companies, threatening fairness, competition, and consumer prices in the travel sector.
U.S. Government Called to Respond to DSTs Targeting Travel Tech Firms
In a letter to U.S. government agencies, including the Department of the Treasury and the Office of the U.S. Trade Representative, Travel Tech highlighted the negative effects of DSTs. These taxes mainly target businesses using digital platforms, such as online travel agencies (OTAs), short-term rental services, global distribution systems (GDSs), and travel management companies. According to Travel Tech, DSTs create an unfair competitive environment, harming U.S.-based travel tech firms that rely on international transactions and operate on narrow profit margins.
Travel Tech argues that DSTs penalize companies for their revenue, rather than net income, which does not align with the way travel technology businesses function. Many of these companies are intermediaries that facilitate transactions but do not retain large amounts of revenue, making DSTs a significant financial strain that could push some out of business.
Double Taxation and Data Compliance Issues
In addition to the financial burden, Travel Tech points out the issue of double taxation, where multiple countries tax the same revenue. This leads to confusion and inefficiencies, making tax compliance more difficult for companies that are already dealing with complex regulations. Moreover, DSTs require companies to collect detailed user location data to calculate taxes, which may not be easily accessible for business-to-business (B2B) travel technology providers. This data requirement could conflict with privacy laws and consumer protection regulations.
Laura Chadwick, President & CEO of Travel Tech, said, “Our members are at the forefront of digital innovation in travel, connecting consumers with travel service providers. The unequal impact of DSTs on travel marketplaces threatens transparency and competition, ultimately harming consumers.”
Potential Impact on Travel Industry Prices
The letter also highlights the potential wider impact on the travel industry, warning that if travel technology companies are forced to absorb the costs of DSTs, prices for travel services could rise. This could lead to higher booking fees for travelers, less competition among service providers, and a slowdown in innovation. Additionally, travel tech firms from countries that do not impose DSTs could have an advantage over U.S. companies, further harming the U.S. industry.
Travel Tech calls on the U.S. government to use trade policy and international negotiations to push back against the growing use of DSTs, ensuring fair treatment for digital travel companies globally.
Previous Appeals and Industry Concerns
This recent letter is part of a series of appeals from Travel Tech. In 2023, the organization wrote to the former U.S. Trade Representative in response to Canada’s introduction of a DST. Similar concerns have been voiced by other digital service providers, with major tech companies advocating for broader policy solutions to address global digital tax challenges.
Industry leaders argue that DSTs could fragment international trade agreements, create trade barriers, and add administrative burdens. While some countries are considering tax reforms and international tax frameworks backed by the OECD, DSTs remain a contentious issue for digital businesses around the world.
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