Hospitality industry - More municipalities introduce bed tax
You are called Bed and Tax or Accommodation Tax, and it is increasingly being imposed in Lower Saxon cities and municipalities. For instance, those who overnight in a hotel or vacation home in more communes must reckon with an additional tax. Hannover introduced such a levy at the beginning of the year, while it took effect on July 1 in Laatzen in the Hanover region, in Leer in East Friesland, and in Bleckede on the Elbe, according to city reports. In further cities such as Hildesheim, Emden, Springe, and Hameln, the introduction of such a levy is being discussed or planned, as the Taxpayers' Association in Lower Saxonia informed the German Press Agency on inquiry.
According to the Taxpayers' Association, the Hotel and Gastronomy Association Dehoga, and the Interior Ministry, there are overnight accommodation taxes in Lower Saxony in Hannover, Cuxhaven, Lüneburg, Hann. Münden, in the communities of Adendorf and Amt Neuhaus in the Lüneburg district, and in the community of Lembruch (Landkreis Diepholz). Lüneburg extended the existing tax at the beginning of 2024 to business travelers.
Bed tax lucrative revenue source for municipalities
The reason that more municipalities are imposing bed taxes, according to Jan Vermoelen, a board member at the Taxpayers' Association in Lower Saxony, is due to a court ruling. After years of debate about the tax, the Federal Constitutional Court ruled in 2022 that cities and municipalities can levy an overnight accommodation tax on guests. Furthermore, the Karlsruhe judges gave the green light for an extension to business travelers, who had previously been exempted.
"Thus, the potential tax base has broadened, and the introduction of a bed tax appears lucrative to many municipalities as a result, as they could only tax private overnight stays before," Vermoelen shared. In addition, the financial situation of the municipalities in Lower Saxony has significantly worsened. "Many municipalities are currently desperately seeking new revenue sources. The bed tax comes in handy for them," the tax expert said.
Different names - but the same principle
The names and forms of the taxes in the individual municipalities vary, and the Taxpayers' Association noted that they are often called accommodation tax or overnight accommodation tax. Municipalities can levy these taxes according to the Lower Saxony Communal Tax Law. The revenues flow into the general budget and are not earmarked. However, this is different for tourism contributions or guest contributions, which can only be levied in spa or recreational areas and must be used for tourism purposes.
The basic principle of the bed tax is the same: Mostly, a specific percentage of the overnight accommodation price is charged per person and night. In some cases, a fixed amount must also be deducted. In some places, business and private stays are also distinguished. According to the Taxpayers' Association, in some places, specific groups or travel reasons are also exempted from the levy, such as school trips.
Criticism from hosts and Taxpayers' Association
The criticism from hosts and the Taxpayers' Association is that the bed tax is an additional burden for travelers and could discourage tourism. They also argue that the tax revenue is not earmarked for tourism infrastructure or marketing, but flows into the general budget of the municipalities. The Taxpayers' Association also criticizes the lack of transparency in the use of the revenues and the fact that the taxes are often not uniformly applied across the country.
The Hotel and Restaurant Association assumes that in the future, more communes will levy lodging taxes. "All communes are suffering from financial distress," said Renate Mitulla, managing director of Dehoga in Lower Saxony. "We assume that all communes with a significant accommodation revenue will eventually consider this way, as they are ordered to do so by the municipal supervision to balance their budgets."
The industry association criticizes the additional costs for guests and the bureaucratic burden for hosts. Cost increases and a lack of labor were already burdening the hospitality industry. Now, in some places, a lodging tax is added, which hosts have to pay and pass on to their guests. This means that accommodations will become more expensive for guests and in a time when not only private travelers but also companies are very price-sensitive, said Mitulla.
For communes, lodging taxes, according to Dehoga and the Taxpayers' League, will become a competitive factor. "The increase in the accommodation price will always lead to some guests staying in neighboring communes where the levy is not imposed," said Vermoelen from the Taxpayers' League. Places with the tax will then have a disadvantageous location. If guests stay away or leave, this will also affect other industries, such as retail or gastronomy. Other tax revenues such as payroll, sales, and business taxes could decrease.
City Day: Accommodation businesses benefit from attractive infrastructure
The Lower Saxony City Day has a different view. The ongoing costs for municipal tasks on the one hand and a widespread poor financial situation on the other hand led to the discussion of introducing a lodging tax in communes, the Lower Saxony City Day stated in response to an inquiry.
The lodging tax should be understood as a cultural and tourism promotion tax. "Strongly frequented tourism or also fair locations require well-developed and entertaining infrastructure," said Chief Managing Director Jan Arning. "The infrastructure that strongly frequented tourism communes must provide goes beyond what is necessary only for the population." These expenses must be financed. An attractive infrastructure will then indirectly also benefit accommodation businesses, according to the City Day.
In Hannover, where a lodging tax for overnight stays in hotels, camping sites, and holiday apartments has been in effect since January, it has announced that about one third of the revenues will be used for the promotion of the Messe-, Culture- and Tourism Location. Previously reported earnings amounted to around ten million Euros per year.
Press release of the city of Bleckede Information on the lodging tax in Laatzen Information on the lodging tax in Hannover Dehoga press release from 20.02.2023 Information on the overnight accommodation tax in Leer Information on the overnight accommodation tax in Hann.Münden
- Despite the Bed and Tax or Accommodation Tax being increasingly imposed in Lower Saxon cities and municipalities, some places, such as Hamelin, are still discussing or planning its introduction.
- In Lower Saxony, cities like Cuxhaven and Lüneburg have bed taxes that charge a specific percentage of the overnight accommodation price per person and night.
- The hospitality industry, including associations like DEHOGA, critiques the bed tax for being an additional burden for travelers and potentially discouraging tourism.
- Municipality of Laatzen introduced the Bed and Tax at the beginning of July in the Hanover region, following Hannover, Leer in East Friesland, and Bleckede on the Elbe.
- The Lower Saxony Communal Tax Law allows municipalities to levy bed taxes, often referred to as accommodation tax or overnight accommodation tax, which flow into the general budget.
- Hildesheim, Emden, Springe, and Hameln are among the cities in Lower Saxony where the introduction of a bed tax is being discussed or planned, as stated by the Taxpayers' Association.
- The Taxpayers' Association in Lower Saxony criticizes the lack of transparency in the use of bed tax revenues and the fact that the taxes are often not uniformly applied across the country.
- The municipalities in Lower Saxony are increasingly imposing bed taxes due to a court ruling that broadened the tax base and made it lucrative for their finances, according to Jan Vermoelen, a board member of the Taxpayers' Association.
- Lüneburg extended its existing bed tax to business travelers at the beginning of 2024, making it one of the municipalities with an overnight accommodation tax in Lower Saxony, alongside Hannover and other cities.
- The Hotel and Gastronomy Association Dehoga predicts that more communes in Lower Saxony will levy lodging taxes in the future, given the financial distress many municipalities are currently facing.
