The Campaign to Cut Tourism VAT
One of the flagship policies that the BHA fights for is a reduction in VAT from 20 to 5% on visitor accommodation and attractions.
The UK’s Tourism VAT rate is 20%, almost twice the European average. This is a major contributing factor to the UK being ranked second to last by the World Economic Forum (135 out of 136 countries) in terms of the price competitiveness of its tourism industry.
The Campaign to Cut Tourism VAT calls for the rate of Tourism VAT to be cut from 20% to 5% to be brought in line with competitor destinations in Europe. The UK is one of only three countries in Europe without a reduced rate of tourism VAT and not taking advantage of the many benefits a reduction brings.
Why do nearly all European competitor destinations have a reduced rate of Tourism VAT? The reason is that the logic to do so is clear; any increase in tourism spending brings a significant multiplier benefit to an economy. In the UK, for every £1 spent on tourism a further 50p is spent in the wider local economy.
The example of countries like Ireland show that a reduced rate of tourism VAT causes a chain of events that would benefit other parts of the economy. A 5% tourism VAT rate would increase domestic tourism spending and make the UK a more attractive destination to foreign tourists, improving the nation’s trade balance in services. The increase in consumer spending and business investment prompted by the tax cut would spur economic growth across the UK, especially in rural and coastal areas which are proportionately more reliant on the tourism industry.
The growth would lead to an increase in employment, with a reduction in tourism VAT creating 121,000 jobs over the first 10 years of its implementation. The sum total of all of these effects would be an increase in tax receipts for the Treasury. Over the same 10 year period, a reduction in Tourism VAT would raise over £4.6 billion for the Treasury.
Independent research carried out by a Treasury adviser using the Government’s own economic modelling confirmed this. He concluded that lowering the rate of tourism VAT to 5% is:
“one of the most efficient, if not the most efficient, means of generating GDP gains at low cost to the Exchequer that we have seen with the CGE model”.
A cut in Tourism VAT has also been recommended by leading economists, three select committees, MPs from all parties and the assemblies of the devolved nations.
In short, a reduction in tourism VAT from 20% to 5% would be good for the consumer, businesses, the economy and the Treasury.
To find out more about the campaign and to register your support, visit www.cuttourismvat.co.uk.
Nick Varney, Chief Executive, Merlin Entertainments and BHA Chairman says:
“Reducing Tourism VAT will make UK tourism much more competitive. More British people will be able to take an extra short break in the UK and we will also attract more foreign tourists.”
Dermot King, Director of Bourne Leisure and Chairman of the Campaign to Cut Tourism VAT says:
“Our industry does not receive the recognition we deserve from government for our massive contribution to UK plc. The foremost example of this is the Treasury’s refusal to follow European best practice in Tourism tax matters. With the issue of Tourism VAT now firmly on the political agenda across the UK, the Campaign to Cut Tourism VAT has greater momentum than before. It is time for the Government to support British consumers and businesses and apply the Tourism VAT cut.”