While Canada has backed off its planned digital services tax amid trade talks with the U.S., the Travel Technology Association (Travel Tech) continues to decry similar taxes in place in other countries, saying they are discriminatory and affect competition among some U.S.-based travel companies.
The definition of firms subject to digital services taxes (DSTs) varies by country but generally encompasses large companies that operate marketplaces, like OTAs, GDSs, travel management companies, metasearch engines and short-term rental platforms. Tax rates vary from 2% to 7% on gross revenues, which Travel Tech says is problematic as it's not based on net income for the "high-volume, low-margin businesses" affected. Citing a U.S. Trade Representative estimate, Travel Tech said American companies overall pay around $880 million a year in DSTs.
Further, DSTs often exclude large suppliers, Travel Tech contends, meaning services provided by OTAs or GDSs selling airline tickets or hotel nights are taxed, but sales of the same directly by the supplier are not.
"What is happening right now is of real concern, but that concern will only grow if other countries continue [implementing DSTs]," said Laura Chadwick, CEO of Travel Tech, which says the taxes are currently being levied in France, Spain, Italy, India, Austria, the U.K. and Turkiye. "We are thankful for the Trump administration's leadership here to address this issue," Chadwick said.
Canada reverses course
On June 30, Canada was set to begin collecting payments on a retroactive DST. But after President Trump announced he would suspend trade talks with the country over the tax, the Canadian government canceled it the night before it went into effect.
That decision was applauded by Travel Tech and some of the companies that would have had to make a payment.
"We appreciate the administration's focus on DSTs and welcome the recent progress with Canada as a positive step toward a fairer global tax policy," said a spokesperson for Booking Holdings (No. 1 on Travel Weekly's Power List). "Fair tax frameworks are an essential enabler of a competitive travel industry, which unlocks greater innovation and consumer choice for all."
Laura Chadwick
While Chadwick welcomed the decision, she said in a statement that "continued dialogue between the U.S. and global partners is essential to ensure international tax policy does not unfairly burden the travel technology industry. This includes continued opposition to DSTs across jurisdictions."
A Sabre spokesperson agreed, saying, "We hope that other countries will follow Canada's lead and work toward an international tax structure which is fair to all."
Double taxation possible
Another issue Travel Tech has with DSTs is that they can result in double taxation on bookings. The association outlined that scenario in a March letter to U.S. Trade Representative Jamieson Greer.
"For example, a traveler based in Country A (which has a DST) books a hotel in Country B (which also has a DST) through a GDS headquartered in Country C," Travel Tech wrote. "In this scenario, both OTAs and GDSs may be subject to DSTs in multiple jurisdictions -- even though they are intermediaries facilitating a single transaction. At the same time, ordinary corporate income taxes still apply, further compounding the tax burden."
Travelport said that complexity is an unnecessary burden on companies.
"Travelport recognizes the need for a fair and equitable tax system for the digital economy," a spokesperson for the GDS said. "However, the unilateral imposition of DSTs in various territories can lead to unnecessary complexity and does not necessarily achieve a level playing field in international tax."
Chadwick said DSTs remain a top priority at Travel Tech. She is hopeful the Trump administration will continue to use trade negotiations to eliminate the taxes, something Travel Tech members look upon favorably.
"American Express Global Business Travel strongly believes that international business travel is a force for good," said a spokesperson for the travel management company (No. 3 on Travel Weekly's Power List). "We support all efforts to remove additional taxes or friction from the international travel process to better assist our clients and business travelers."
Note: This article has been updated with a statement from Travelport.