Denmark has lost more tourists than other EU countries the last decade. Relative increases in prices and exchange rates explain some of the loss, but unfavourable taxation and lacking marketing is also part of the explanation.
With 25 percent, Denmark has one of the highest value added taxes (VAT) on hotels and restaurants. Furthermore, certain VAT rules that only apply to hotels and restaurants makes it more expensive for business tourism to use Danish hotels and restaurants. These VAT rules put the Danish hotel industry in unequal competition with other domestic industries and makes it difficult to compete with foreign competitors. Other aspects, including prioritization of marketing and development of attractive tourist destinations, need more consideration in order to regain growth. If Denmark is able to catch up with the rest of EU in attracting foreign tourists the industry can generate nearly 10.000 new jobs and contribute to a balanced economic development in Denmark’s regions.
On behalf of a number of tourist companies Copenhagen Economics has analysed the consequences of the loss of competitiveness for the Danish economy as well as the possible gains if growth is achieved. Read the report here. A note analyses the issue of VAT. Another note looks at how Denmarks hinterlands will benefit if growth is achieved.
For further information contact senior economist Claus Frelle-Petersen