In a report published on Thursday 26 March 2015, Parliament’s Culture, Media and Sport Select Committee highlighted the Government’s failure to give the tourism industry sufficient recognition and support. The report reasserts the positive effect a cut in tourism VAT could have on the industry and calls on the Government to give it full consideration.
The Cut Tourism VAT Campaign, which is run by the tourism industry, has been calling on the Government to boost the economy by cutting VAT on tourism. The Select Committee report reaffirms the positive effects a lower rate of VAT on tourism could have in making the UK even better value for money to British and international holidaymakers –as 25 of the 28 countries in the European Union already have a lower rate of tourism VAT, in other to boost their economies.
The Culture, Media and Sport Select Committee is the second Select Committee to look into reducing tourism VAT, after the Welsh Affairs Select Committee recommended in October 2014 that “UK Government review its policy on the VAT rate for the tourism industry, with the ultimate aim of reducing the current 20% rate.”
Ufi Ibrahim, Chief Executive of the British Hospitality Association said:
“Right now, cutting tourism VAT to 5% is the single most transformative tax reform for the UK which could massively boost jobs, bring billions of new revenue to the Treasury and directly improve the livelihoods of people in hard pressed rural and coastal areas as well as our cities. We’re asking Treasury to stop handing over millions in tourist revenues to our European Competitors."
Graham Wason, Chairman of Cut Tourism VAT, said:
“We welcome the Committee’s report and hope the Government is listening. The Committee has recognised the major contribution of the tourism industry to jobs and the wider economy in every constituency of the country. The Report highlights that the rate of VAT on tourism in the UK, at double the EU average, is making Britain uncompetitive.
“Reducing tourism VAT will make days out, short breaks and holidays in Britain more affordable for UK families, as well as encouraging more visitors from overseas to explore all parts of the UK.
“We have extensive and robust research that shows the positive impact a lower rate of Tourism VAT would have – for consumers, for jobs, for the UK economy and for Treasury income. Tourism is the only UK export subject to VAT. Reducing tourism VAT would improve the UK's trade deficit, currently £34.8 bn, by £20.1 bn over 10 years.
“Of the other EU countries, 25 out of 27 recognise these social, economic and fiscal benefits and have reduced VAT on tourism.”
John Whittingdale MP, Chair of the Committee, said:
“The tourism sector is a major part of the UK’s economy and creates millions of jobs, involving a lot of small businesses and unique features such as seasonality and uncertainty in customer demand.
“Given the size of its contribution, there is not enough recognition of or support for the sector or adaptations to its unique features. Tourism needs a stronger voice, and Government should look at how the burden of regulation and taxation on the tourism industry could be lightened to boost its contribution even further.”