The Estonian Hotel and Restaurant Association (Shor), representing Estonian hotels and restaurants, has sharply criticized the country’s Minister of Economic Affairs, Erkki Keldo, for his assertions that this business sector is thriving. Hoteliers and restaurateurs state that the industry is on the verge of survival and insist on a meeting with the minister to present the real picture. This was reported by ERR.
High Taxes and Falling Profitability
A key stumbling block is tax policy. According to the head of the association, Külli Kraner, the turnover tax on catering services in Estonia is one of the highest in Europe. As this tax directly falls on the shoulders of the end consumer, it makes catering services significantly more expensive.
This leads to serious consequences for businesses:
- The number of visitors decreases, reducing turnover and profitability.
- Businesses find it harder to invest, retain jobs, and offer competitive wages.
- The sector’s profitability already reached a record low of 1.4% in 2023, and forecasts predict an even worse situation in 2024.
The increase in the turnover tax on accommodation services, which took effect in 2025, has also negatively impacted domestic tourism and international competitiveness.
Critique of Statistics and Market Research
The Hotel and Restaurant Association believes that the Ministry of Economic Affairs’ optimistic statements are based on incomplete statistics. Monthly data on customer numbers do not reflect the real situation of entrepreneurs, their losses from previous years, the growth of input costs (in July, the overall price level increased by 5.6%), or the general economic outlook.
Furthermore, Shor expresses concern regarding the transparency of the short-term rental market study conducted by the ministry. According to Kraner, during one consultation, ministry employees attempted to direct the analysts to avoid political recommendations that could ensure fair competition in the market.
The association was forced to appeal to the Data Protection Inspectorate, demanding that the research materials be made publicly available.
Hotel and restaurant owners call for a joint dialogue with the Minister of Economic Affairs to develop a fair and sustainable tax policy. They emphasize that without support for the industry, many viable businesses could close, making hospitality services in Estonia a luxury item.
