Comment: Cut tourism tax to 5% to bring Britain in line with competitor destinations

Comment: Cut tourism tax to 5% to bring Britain in line with competitor destinations

Says Dermot King, Bourne Leisure managing director and chairman of the Campaign to Cut Tourism VAT

Tourism is a strategic industry for the UK economy; we are the front door to visitors from all over the globe, employ over 4.6 million people and generate billions in revenue for the Treasury every year.

Yet, 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.

All but three of 36 European nations levy a reduced form of VAT on tourism services in recognition of the social and economic contribution of their hospitality and tourism industries. But UK businesses and consumers are faced with 20% VAT, almost double the average rate of our main competitor destinations.

The Campaign to Cut Tourism VAT, of which I am chairman, works on behalf of the industry towards a reduction in Tourism VAT from 20% to 5% with the aim of making Britain’s hospitality and tourism industry more internationally competitive.

Our country has a lot to offer British and foreign holidaymakers, but we are an expensive choice – so much so that the World Economic Forum has ranked us as the second least price competitive in tourism of 136 countries.

For years we have been working closely with politicians and decision-makers of all stripes, including those in Northern Ireland where all Westminster parties now support a Tourism VAT cut. In June, our campaign was given a huge boost when the Government announced a consultation into Tourism VAT for Northern Ireland.

I believe this consultation will not only show the benefits to Northern Ireland of a reduction, but the benefits of a cut for the whole UK. The issue of Tourism VAT is now firmly on the political agenda – giving the Campaign to Cut Tourism VAT even greater momentum than before.

Research shows that a nationwide reduction to 5% would create more than 121,000 jobs, bring in an additional £4.6bn to the exchequer and improve the UK’s high tourism deficit to the tune of £23bn over ten years.

The benefits would be felt far and wide in the UK, particularly helping neglected coastal communities to get back on their feet. These figures are based on a reduction from 20% to 5%, a rate which could be implemented immediately under current EU legislation and is the UK’s accepted lower rate of VAT.

Whilst we support low sales taxes for all services, our strategy is to focus on the accommodation and visitor attraction sector first. Other European countries such as France, Belgium and Finland have extended the tax reduction to cover restaurants too, with success. In the UK, the initial cost to the Treasury of reducing VAT on restaurants and pubs is considerable.

However, when the gains to the UK economy and the Treasury from lower VAT on accommodation and visitor attractions are being felt, the case for extending the reduction to restaurants and pubs will be compelling.

Reducing Tourism VAT on visitor accommodation and attractions would be an investment in the future of our industry and one that would pay dividends. Research shows the measure would be revenue neutral for the Treasury in year two and beneficial by year three.

The Campaign to Cut Tourism VAT has the backing of 126 MPs and rising from across all political parties, leading select committees, three national newspapers and 46,000 businesses nationwide.

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