SoFlyOn

Tourists will no longer have to pay IVA (Value added Tax) on accommodations in Argentina. However it could take several months for the exemption to take effect ...

http://www.thebubble.com/foreign-vis...accommodation/

Gaucho100K

Good move, emulating what various other countries in the region have been doing for some time now.... ^ ^ ^

GUWonder

Nice for foreign tourists, unless and until it results in hotels pocketing money that would have otherwise gone to the government as tax.

Eastbay1K

If they do it anything like their more orderly neighbo(u)r to the West, the hotel needs to maintain evidence of foreign passenger with the paperwork (i.e, passport inside page and copy of arrival slip) and room payment can't be cash.

HIDDY

That's too much hassle.
Best leave it to the guest to claim the tax back when leaving the country. 90% won't bother and the 10% who do will find the tax refund office in EZE closed.

Gaucho100K

....???

Could you please elaborate what you mean..? Do you know how the system of VAT refund to visitors works...? You appear to be sure that hotels will "pocket" this VAT, how do you think they will go by doing this...?

Please, be so kind as to tell us more about your above comments.

Thank you.

Gaucho100K

Similar to the other post, could you please elaborate...?

My company works with the Tax Free program and it works very well. There are various forms of getting your refund and the actual tax refund office is not one of the compulsory steps. The only thing you cannot skip is the Customs Stamp and there is always a customs person on duty at EZE and also at most other points of exit for almost all tourists that would participate in the program.

As I always say, plenty of things to complain about related to how things operate here in Argentina, and I am one of the first to complain about them, but please lets call things like they are... no quick baseless commenting please - that just doesn't add any value to others and may discourage tourists from using tools that work and are to their advantage.

GUWonder

I am not saying they will pocket the VAT, but I'm saying that there is the potential that the final price paid by some hotel customers won't drop as much -- if at all -- as some may hope. When the hotels know that the international demand is there for their services at the "rate+tax" level then a reduction in tax amount need not be passed on entirely (if at all) to prosepective customers and there is an opportunity to hike rates targeted at some customer segments.

Let's say I have a negotiated rate deal for 400 room nights a year at a hotel in BsAs and was fine paying $325/room night inclusive of tax. When it comes to a time post-IVA-waiver to renegotiate for my rooms for the following year at the same property, the hotel may not be willing to adjust down the price in full by the IVA rate amount even were the prevailing public rate not to change at all over that time. In terms of longer term outcome, the hotels may be economically "pocketing" at least some of what would otherwise be government revenue.

On a lighter note, it could be rather amusing for local residents to "borrow a foreigner" -- say a visiting relative or friend -- to help with their hotel nights' cost management. Or will the IVA waiver rule require that no registered guests in the room be Argentine citizens/residents?

VAT refunds/waivers for tangible goods face some different issues that VAT refunds/waivers for services. The VAT refunds/waivers for tangible goods are something with which I'm fairly familiar. And the VAT-type waivers for hotel stays in some countries are also not all that foreign to me. I do have some Chilean relatives also.

My VAT refunds on departure from EZE have been handled well. I've gotten all my rebates back as expected. I wish I could say the same thing for some of my goods exported from the Schengen Zone via ARN and FRA and AMS.

I do favor the VAT waiver of collection over the VAT refund process when it comes to goods; but when it comes to travel services like hotels, I may rather have the refund process than the IVA waiver if I'm in the market a lot.

HIDDY

It was a tongue in cheek reply to the how it works in ''more orderly Chile'' post which sounds like too much extra admin for hotels. I wonder if guests are informed a copy of their passport details will be kept on file?

UK hotels are obliged to include VAT in the published room rate. I have never claimed a tax refund on any stays in the UK in fact I'm not even sure they are refundable. I suspect many other visitors aren't either.

Glad to hear your experience of how it works here is positive.

SoFlyOn

Peru has the same setup. You'll be asked for your passport when you check into a hotel and they'll tell you that they need to make a copy of the front pages and entry stamp so that you can be exempt IVA. I've only ever paid by credit card in Peru so I don't know whether cash can't be used for payment.

Gaucho100K

Im sorry, but you don't understand how this system works.... but that's OK, after all, the VAT system is quite complicated and a lot of people make honest mistakes about it.... (all the time).

This is not about a lowering of prices, its about incentives for tourists and its practical implications on invoicing of hotel expenses. No merchant (hotel or otherwise) will higher or lower its prices because of this refund system... that is not what this is about and not how is works in practice.

But no matter, its was interesting to read what your thoughts/conclusions are. Thank you for sharing.

^

GUWonder

Incentives and practical implications of what ends up on the folio/invoice is what I was talking about. It doesn't always work out in all the way governments intended. .

I am indeed a citizen of a country with no VAT -- the US -- but I spend more time in countries with VATs than in countries without any such thing.

On Tuesday, I was discussing criminal VAT fraud with a prosecuting team in a country with VAT. Tomorrow I have a meeting on tax fraud investigations in the context of disrupting financing for organized criminal enterprises. I am sure the customs authorities and prosecutors here would be shocked to hear that I have no understanding of VAT. I'll let them know.

Eastbay1K

Also note that, in comparison to almost all other goods and services in VAT countries that have a final price, lodging is typically a rare exception that has a base price with VAT added. Accordingly, fraud opportunities are more limited.

GUWonder

Fraud opportunities are more limited in many ways when it comes to services than when it comes to goods, but the opportunities are different as well.

But the issue I raised initially isn't so much that of seller fraud -- it wasn't about that at all -- when it comes to lodging services as it is that the final cost paid by consumers won't necessarily fall by the full amount that the VAT reduction would otherwise indicate.

If you know you have customers willing to pay a market-clearing final cost -- tax inclusive -- of $100, then you know that a reduction in calculated tax due from customers may provide an opportunity to keep the final price at $100 even when the tax is reduced/waived/eliminated and not have the customers pay the tax. Hoteliers already do try to price themselves differently for different customer segments/markets, and the waiver of IVA on lodging services consumed by foreign parties won't stop that. In economic terms, government surplus will be reduced, supplier surplus will increase (as a result of grabbing a big chunk of what was previously government surplus), and consumer surplus will change but not be as sustainable as the supplier surplus.

I do welcome the IVA waiver, but it's not on the expectation that the IVA exemption is going to mean that I am going to generally see materially lower nightly room costs at the properties I'm most likely to use over the longer term. For hotels that have few international customers, international customers using those hotels are more likely to gain disproportionately more from the IVA exemption than I will. Of course if I start taking a slice of Argentine hotels up for sale, well that's a different story.

TravelinSperry

Wow. Argentina is quite an inexpensive place already - with no IVA on hotels it makes it even more so. Might be time to visit BsAs again