PACKAGE TOUR CANCELLATIONS AND CONSUMER RIGHTS 213 new bookings, only cancellations. They cannot return deposits to customers, as these funds were transferred to the third parties (such as airlines or hotels). A notable fact is that the six largest tour operators repatriated 2,670 Latvian residents at their own cost, which amounted to about 700,000 €. The Ministry of Economics of Latvia will call upon the Government to cover these costs. At the same time, the Ministry will call for support for the proposal to introduce a mandatory voucher system, stipulating that, instead of refunding, the tour operator will issue to the traveller an insured voucher, valid for eighteen months. The refund can be made, if the voucher is not be used within its validity. Besides, according to the Package Travel Directive, the norms of which have been incorporated into the Cabinet of Ministers Regulation No 380, as of 26 June 2018, “Regulations regarding the Procedure of Preparation and Provision of Package and Related Tourism Services and Rights and Duties of Providers of Package and Related Tourism Services and Travelers”, stipulate that the tour operator is obligated to reimburse the traveller for cancelled or missed travel. To protect the tour operators from insolvency, several European countries (i.e. Belgium, France, Greece, Croatia, Italy, the Netherlands, Poland, Spain and Germany) have introduced a mandatory voucher system, with countries, such as Lithuania and Estonia, introducing an optional voucher system. Vouchers must be insured against the tour operators’ insolvency (covered by security). If the consumer does not use the voucher, he will receive a full refund after the voucher expires. In the event of massive bankruptcies of the industry, the existing collateral system may collapse, creating a negative fiscal impact on the state budget of more than 18.7 million euros, which is the current industry's liability to consumers (total amount of the security). In Latvia, the VAT rate for catering services is 21%, which is the second highest rate in the EU. It is important to note that in nineteen EU countries the catering sector is subject to a reduced VAT rate; the average VAT rate for an industry in the EU is 13.5%. From 1 July 2020, the VAT rate for catering services in Germany will be reduced from 19% to 7%. Lithuania, on the other hand, is considering reducing the VAT rate on catering services from 21% to 9% and Estonia is discussing the application of a reduced VAT rate of 9% to catering companies. The VAT rate for accommodation services in Latvia is 12%; the Ministry of Economics of Latvia prepared a series of proposals to support the tourism sector, including the introduction of reduced value-added tax rate of 5% for the catering and accommodation services for three years to overcome and be able to recover from the COVID-19 crisis, however, it was not accepted by the Government.
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