“Cut Tourism VAT” campaign wants boost to UK tourism by cut in VAT to 5% on holidays in UK
Date added: January 8, 2015
Domestic travel companies are warning that they will find it hard to compete on price with their European competitors this year due to the falling value of the euro, plus high VAT rates in the UK. The euro is now worth just 78p compared with 84p last March, making the Continent 7% cheaper for holidays. The Government’s has abolished APD on air tickets for children aged under 12 from May this year, and will make it even harder for UK holidays to compete. Calling for a reduction in VAT for tourism to 5%, down from 20%, members of the Cut Tourism VAT campaign said it had the support of over 43,000 businesses and more than 100 MPs. The UK government has created an anomaly whereby families who go abroad get a new tax benefit but families who holiday in the UK do not. UK tourism businesses say domestic tourism can help drive growth in the UK economy but only if it remains competitive. Cut Tourism VAT campaigners say VAT in Britain on accommodation and attractions is three times that of Belgium, Greece, Netherlands and Portugal and twice that of Germany and France. The campaign says cutting VAT to 5% could boost the UK economy by up to £4 billion annually and create over 120,000 jobs around the UK. That would reduce the UK’s tourism deficit, caused by flights. . Tweet
Falling euro to spark ‘massive rush to book holidays in Europe’
Bosses of domestic travel companies are warning that they will find it hard to compete on price with their European competitors this year due to the falling value of the euro combined with high VAT rates in the UK.
The Government’s plan to abolish air tax for children, starting from May this year, will make it even harder for them to compete, they said.
Calling for a reduction in VAT for tourism to 5%, members of the Cut Tourism VAT campaignsaid it had the support of over 43,000 businesses and more than 100 MPs.
Dermot King, managing director of Butlins, said: “Unfortunately, the Government’s new measures on APD (air tax) have created an anomaly whereby families who go abroad get a new tax benefit but families who stay at home do not.
“Tourism, particularly domestic tourism, can help drive growth in the UK economy but only if it remains competitive. We urge the Government to reduce Vat on UK holidays to a fair level, so that we can offset the impact of a falling Euro and reduced APD charges.”
The euro is now worth just 78p compared with 84p last March, making the Continent 7% cheaper for holidays, said the Cut Tourism VAT group.
“This will almost certainly lead to a massive rush to book holidays in Europe and further afield by thousands of British families. This could have a devastating effect on many struggling UK tourist companies and resorts.”
Cut Tourism VAT campaigners say VAT in Britain on accommodation and attractions is three times that of Belgium, Greece, Netherlands and Portugal and twice that of Germany and France. “This makes it more difficult for hard-working families to be able to afford a holiday in the UK,” it said.
Out of the 28 EU member states, Britain is one of only three that does not take advantage of the reduced rate of VAT on visitor accommodation and visitor attractions.
David Bridgford, Strategy Director, Merlin Entertainments said: “The UK Government has failed to understand that tourism is a price sensitive export. Their failure to address the UK’s price competitiveness means UK tourism businesses are losing out and the tourism jobs we could create are being exported to our rivals.”
Graham Wason, Chairman of the Cut Tourism VAT Campaign said: “The Government has a huge opportunity to boost British exports by lowering VAT. Other European countries, like Ireland, know that helping their tourism industries compete is an investment that will pay major dividends in terms of jobs and extra tax revenue. It’s time for Westminster to recognise the benefits of a lower rate of Tourism VAT.”
The Cut Tourism VAT is campaigning for the rate of Tourism VAT to be brought into line with competitor destinations within the European Union.
There are a limited number of areas where EU rules allow governments to implement a reduced rate of VAT.In the case of tourism the United Kingdom is one of only four countries not to take advantage of a reduced rate.
This means that British families or international visitors choosing a British holiday would pay almost three times as much VAT compared to a French or German break, and twice as much as one in Italy and Spain.
As such British tourism businesses are continuing to lose further ground to our European rivals in attracting domestic and international holidaymakers. The results of this can be seen in struggling popular tourist destinations, especially in coastal areas.
Reducing tourism VAT would help lower prices, but also allow businesses to increase investment in these areas.
In addition this measure would increase revenue to HM Treasury. Independent research carried out by a Treasury adviser using the Government’s own economic model has 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”. [See link for source].
Additional research by Deloitte/Tourism Respect found that such a reduction would contribute an extra £2.6 billion to HM Treasury over ten years and create 80,000 jobs.
Air Passenger Duty on economy flights for children under 12 cut from May 2015 (under 16s from May 2016)
December 4, 2014
In the Autumn Statement, the Chancellor has announced that APD on children’s flights will be scrapped for all economy class tickets (not first class). From 1st May 2015, APD for children under 12 will be abolished and in May 2016, APD for all children under 16 is to go. This means the Treasury will miss out on £40 million in 2015/16 and £85 million in 2017/18 and £95 million in 2019/20. The air travel industry had called for the change on the basis that it would make an annual holiday more affordable for hard pressed families. But in fact it is most likely to benefit airlines, and those on higher incomes taking several flights a year. The families struggling the most financially might at most take one European flight per year (saving £13 per child). Those able to afford long haul trips will save £71 per child – so more savings for the better off? It airlines, airports and tour operators really wanted to help make an annual visit abroad affordable for more families, they could stop hiking their prices during the school holidays. The annual APD tax take will now be £3.2 billion in 2014/15 and still £3.2 billion in 2016/17 (while the 2011 Autumn statement estimated it would be £3.8 billion).
Tourism VAT campaigners take their case to government
By Lee Hayhurst
30 July 2014 (Travel Weekly)
Campaigners demanding a cut in VAT for UK tourism firms will hand over research to the Treasury today claiming the move would boost the economy by up to £4 billion annually.
The Cut Tourism VAT Campaign also claims reducing the sales tax would net the government a £3.9 billion one-off windfall.
The Nevin Report, commissioned by the campaign, says that a cut from 20% to 5% for visitor accommodation and attractions would boost the UK’s tourism economy.
This is in addition to a boost to GDP each year peaking at £4 billion per annum, and the creation of over 120,000 jobs around the UK.
The group says political backing for the Cut Tourism Vat campaign has grown with over 70 MPs indicating their support.
Nick Varney, chief executive of Merlin Entertainment, said: “Doing a few fancy posters saying ‘Heritage is Great’ and putting them up at Shanghai Airport is not going to turn around 30 years of constant decline. If all UK holidays became 15% cheaper, economics tells you what’s going to happen.”
The campaign group claims 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 says it is one of just four countries in Europe not to have a reduced rate of VAT for the tourism sector.
The Nevin Report states cuts made in France, Germany and Ireland in the last five years have been hugely successful.
The new report adds to a Deloitte study conducted in 2011, and analysis by Prof Adam Blake using the Treasury’s own model in 2012 who said: ‘cutting Tourism VAT represents one of the most, if not the most efficient, means of generating GDP gains at a low cost to the Exchequer.”
A series of tourism firms, operators and organisations and MPs in the UK have thrown their weight behind the campaign
Patrick Dempsey, managing director of Whitbread Hotels and Restaurants, said: “We fully support the initiative to cut tourism tax.
“A cut would deliver a huge financial boost for tourism around the UK and 120,000 new jobs with 8,000 already being created by Premier Inn by 2018.”
Ufi Ibrahim, chief executive of the British Hospitality Association, added: “As the driving force behind our recovery, it’s vital we help smaller firms grow.
“Cutting VAT to 5% not only allows the sector to be competitive with Europe, where the majority of countries charge less VAT, but it shows hard grafting businesses the government is behind them.
“No one denies the cut would dent tax revenues initially, but this is a chance for politicians to prove they are really in it for the long by making an investment in an industry which is the UK’s biggest employer of young people.”
Graham Wason, chairman of the Cut Tourism VAT Campaign, said: “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. More than 60 cross-party MPs have signed our parliamentary motion and more than 1,000 companies and groups are backing the campaign.
“David Cameron and George Osborne should remember that next election will be won or lost in the regions and in coastal constituencies who would benefit from the huge boost cutting tourism VAT would add to our economy.”
Dermot King, managing director of Bourne Leisure, which owns Butlins, said: “As the pound continues to strengthen against the Euro driven by a combination of Mark Carney indicating higher UK interest rates and the European Central Bank considering a programme of quantitative easing, the gap in price competitiveness between the UK and her European partners widens.
“Outside of the London bubble, UK tourism continues to try to compete with not just one but increasingly two arms tied behind it’s back.”
Margaret Ritchie, MP for South Down said: “A cut in the rate of [Tourism] VAT would create demand, which would spur job creation and go some way towards reducing youth unemployment.”