This morning I was contacted by a reporter for the German public broadcaster BR24 who asked if I still had copies of TUI’s annual reports that I had analyzed and referenced in my book on tourism and tax avoidance entitled “Sun & Sea Tourism: Fantasy and Finance of the All-Inclusive Industry”. According to the reporter TUI recently received €1.8 billion in state credit and other subsidies. Then TUI proceeded to lay off 8,000 employees. This is all the more shocking for two reasons.
Customers pay months in advance the price of their vacation before even stepping on the TUI plane to spend weeks at a TUI-affiliated all-inclusive hotel and, while there, take TUI-organized tours. After the tourist leaves the destination, these large corporations can take up to 90 days to pay the hotel at an often artificially low amount among related companies. In other words, large corporations specializing in all-inclusive packages have the customer’s cash up to six months before they pay a dose of funds to their inter-group hospitality companies. This brings me to my second point.
In 2014, TUI boasted on its now-removed website that it had “677 direct and indirect subsidiaries at the balance sheet date, of which 47 were based in Germany and 630 abroad [plus a] further 22 affiliated companies and 40 joint ventures.” In 2013, TUI generated only 2% of sales from hotels but these sales generated 25% of earnings before taxes, interest and depreciation. According to the TUI AG 2013 annual report, more than one-half of TUI Hotels & Resorts sales are inter-group. In 2012, TUI AG had amassed €5.3 billion of tax loss carry-forwards, so large that their accountants estimated that TUI AG could apply €1 billion against gains. But even this amount translates into direct tax credits of an estimated €217 million.
TUI will argue that it pays taxes, and in fact, it did. In 2012, TUI AG cash flow showed that it paid €120 million in taxes. Meanwhile, the balance sheet for the same year showed that the company had €110 million in tax refund claims. Seemingly paying little in taxes at home and abroad did not disqualify TUI from receiving €1.8 billion in credit and then thanking the state by laying off 8,000 workers. Cash has evaporated but so have their boastful websites.