“Cut Tourism VAT” campaign wants tax cut from 20% to 5% on UK tourism to boost tourism jobs and earnings
Caroline Lucas, the Green MP for Brighton Pavilion, is campaigning for a cut in the rate of VAT on UK tourism. She hopes that more tourism for her constituency would be of benefit, and also for the tourism industry across the country. She has had meetings with other MPs and industry leaders, hosted by the “Cut Tourism VAT campaign.” Caroline has asked the Treasury to cut the rate of VAT on UK tourism from 20% to 5%, arguing that it would create jobs, and end the competitive disadvantage currently facing the UK tourism industry in the European market. She is also seeking to secure a parliamentary debate on the issue. The UK is one of only four countries in the EU with no reduced rate of VAT on tourism. The others are Slovakia, Lithuania and Denmark. A 2011 report by Deloitte and Touche found that a 5% reduction in VAT would deliver £2.6 billion in extra revenue to the Treasury over a decade, and create 80,000 jobs over two to three years. The “Cut Tourism VAT campaign” is initially calling for a reduction for accommodation and attractions, but would ultimately want to extend the cut to restaurants (excluding alcoholic drinks).
Caroline Lucas in renewed drive to cut VAT on tourism
15 January 2014 (Caroline Lucas’ website)
Caroline Lucas, the Green MP for Brighton Pavilion, is at the forefront of a renewed push for a cut in the rate of VAT on tourism, highlighting its potential benefits for the Brighton and Hove tourism industry, which accounts for an estimated 14% of the city’s workforce.
This morning she took part in a round table meeting of MPs and industry leaders hosted by the Cut Tourism VAT campaign. It was agreed that the campaign would be stepped up in a drive to build grass roots momentum.
At the end of last year, Caroline wrote to the Treasury calling for the rate of VAT on tourism to be cut from 20% to 5%, arguing that it would create jobs, and end the competitive disadvantage currently facing the UK tourism industry in the European market. She is also seeking to secure a parliamentary debate on the issue.
Caroline Lucas, Green MP for Brighton Pavilion, said: “Brighton and Hove has some of the best visitor attractions in the country. But the fact that the UK is one of the few European countries that doesn’t have a reduced rate of tax on tourism puts us at a major competitive disadvantage.
“Cutting VAT on tourism would make a real difference to local businesses and help create jobs for people in Brighton and Hove, especially for young people. It would also make a day out for local families for more affordable, and provide another reason for people to take their holidays in the UK.
“Popular support for the campaign is growing, and I’m sure many more people in Brighton and Hove will want to get behind it.”
The UK is one of only four countries in the EU with no reduced rate of VAT on tourism. The others are Slovakia, Lithuania and Denmark. A 2011 report by Deloitte and Touche found that a 5% reduction in VAT would deliver £2.6 billion in extra revenue to the Treasury over a decade, and create 80,000 jobs over two to three years.
The Cut Tourism VAT campaign is initially calling for a reduction for accommodation and attractions, but would ultimately want to extend the cut to restaurants (alcoholic drinks would not be included).
Link to Cut Tourism VAT factsheet:
The Cut Tourism VAT campaign website is at http://www.cuttourismvat.co.uk/
and they are on Twitter at @CutTourismVAT
The Cut Tourism VAT factsheet says:
“Reducing the rate of VAT for tourism services has been proved to work. The track record across Europe shows that a reduction in VAT stimulates investment, creates employment and boosts growth. Countries that have reduced VAT on part of their tourism sector in recent years, in spite or indeed because of recession, include Germany, France, Belgium, Finland and Ireland. The evidence confirms the fact that tourism is highly price sensitive and competitiveness is damaged by high rates of taxation.”
“The UK tourism industry is a major sector of the economy. It contributes £134bn in direct and indirect spend representing 9% of GDP, employs 2.72m people and is a key driver of national as well as all UK local economies – creating a third of all new jobs in the UK between 2009 and 2011. But in a global tourism market, the current rate of 20% VAT undermines UK tourism’s ability to compete effectively. Reducing VAT on tourism services to 5% will increase UK competitiveness, create jobs and grow GDP.”
Their website says:
On three main counts:
1. The higher rate of VAT in the UK makes the UK uncompetitive with nearly all other European competitor countries.
2. Tourism is the only export which is subject to a domestic tax.
3. The independent study by Deloitte/Tourism Respect forecasts that if VAT were reduced to five per cent for visitor accommodation and attractions, 78,000 full time equivalent jobs will be created in the accommodation and attractions sector
In a survey of BHA members in January 2012, over 95 per cent of over 200 respondents said that if a five per cent VAT rate was achieved some or all of it would be passed on. 82 per cent said they would invest more in their product/facilities, 67 per cent would employ more people, 57 per cent would invest more in training and just under half (48 per cent) would increase staff wages.
Competition within the sector eventually compels operators to lower prices. The Copenhagen Economics study analysed six case studies where a VAT rate reduction had occurred. The report concluded that: ‘…there is little doubt that permanently lowering the VAT rate on particular goods (or services) sooner or later will lead to a reduction in the price of the goods more or less corresponding to the monetary equivalent of the lower VAT rate … In economics jargon, there will be a strong tendency towards full pass-through.’
(‘Pass through’ here means that the full impact of the reduction in VAT is reflected in lower prices equivalent to the reduction in VAT.)
Similarly, there is little doubt, according to Copenhagen Economics, that the price cuts that result from a permanent lowering of VAT rate will lead to increased consumption and consequently to increased production and employment. Such increases will occur more rapidly and be more significant in sectors with high price elasticity, strong competition and labour-intensive sectors. Tourism displays all three of these characteristics. It can typically take two to three years for this full effect to be realised.