A VAT cut for the UK’s tourism economy would give a £4 billion a year boost to the economy, according to new research.
The Nevin Report, commissioned by the Cut Tourism VAT Campaign, says that a reduction in VAT from 20 per cent to five per cent for accommodation and attractions would massively boost the UK’s tourism economy and cost the government nothing after five years.
These benefits would come alongside a boost to Gross Domestic Product each year that would peak at £4 billion per annum, and the creation of over 120,000 jobs around the UK.
The UK is currently one of the most expensive destinations to holiday in the world, ranked 138th out of 140 for price competitiveness by the Travel and Tourism Index. It is also one of only three countries in Europe not to have a reduced form of VAT for the tourism sector, even though tourism is one of the UK’s largest business sectors, employing more than 3.1 million people and generating £127 billion in 2013.
The report was conducted by leading economic forecasters Michael Nevin Associates.
Ufi Ibrahim, chief executive of the British Hospitality Association, said: “Cutting VAT to five per cent not only allows the sector to be competitive with Europe, where the majority of countries charge less VAT, but it shows hard-grafting businesses that the government is behind them.
Graham Wason, chairman of the Cut Tourism VAT Campaign, added: “This new research is the economic proof the Treasury has asked for to prove what every other country in Europe knows – that cutting VAT on holidays is profitable for governments.
“Many of our coastal towns are ignored but cutting VAT would help them thrive. David Cameron and George Osborne should remember that the next election will be won or lost in the regions and in coastal constituencies which would benefit from the huge boost cutting tourism VAT would add to our economy.”
Almost 60 MPs have signed a motion urging the Chancellor of the Exchequer to introduce a sector-specific VAT reduction for certain tourism-related products, including accommodation and attractions under European Union rules allowing national governments to reduce VAT on certain goods and services.
Whatever aspect of VAT is involved, it is a notoriously complex tax so it makes sense to work with specialists in the field, like the team at Milsted Langdon, who can provide expert guidance on all aspects of VAT compliance and efficiency. For more information, please contact us.