Government turns down request to cut hospitality and tourism VAT (again)

By Emma Eversham

- Last updated on GMT

Related tags: Cut tourism vat, Tax

Despite numerous calls from across the industry, including Jacques Borel's We Love VAT campaign, the Government is refusing to budge on reducing VAT for the sector
Despite numerous calls from across the industry, including Jacques Borel's We Love VAT campaign, the Government is refusing to budge on reducing VAT for the sector
The Government is refusing to budge on its decision not to reduce VAT for the tourism and hospitality sectors despite numerous calls from across the industry and from some MPs to do so.

The latest rejection of the request to lower VAT across the sector to provide a level playing field with tourism competitors in the EU, happened in the House of Lords last week during a debate on the impact of music on tourism. 

Crossbench peer Lord Aberdare made the point that the UK was one of only four countries in the EU not to take advantage of the option to apply a reduced rate of VAT on visitor accommodation and one of only nine to apply the full rate on admissions to cultural attractions. 

"Other countries, including competitors such as France and Germany, have gained additional investment, employment, particularly of younger people who are disproportionately represented in the tourism sector, and growth through applying reduced VAT rates in this area," he said.

Rejection

However, the peer's request was rejected by Baroness Northover who said the Government had already considered it. 

She said: "The Treasury could not see a casual link between VAT rates and tourism levels, so I am afraid that the Treasury is thus far not persuaded. No doubt, it will note what the noble Lord has said." 

Graham Wason, chairman of Cut Tourism VAT, the campaign led by the British Hospitality Association and the British Association of Leisure Parks, said he was grateful to Lord Aberdare for highlighting the subject. 

“Despite the Government’s reply, independent research using the Treasury’s own economic model shows the clear benefits that would accrue from a reduced tourism rate," he said. "There is increasing recognition that this is a growth measure which also has the added benefit of helping hard-working British families afford domestic days-out and breaks.”

Tax Parity Day

The news comes as another restaurant - Indian Summer in Brighton - agrees to take part in Tax Parity Day​. The campaign, led by Jacques Borel's VAT Club, is asking restaurants, pubs and other foodservice operators to drop their prices by 7.5 per cent for one day (25 September). 

It is hoped the campaign will show how operators could lead to an increased turnover for foodservice outlets and bring more equal tax treatment for the catering sector compared to the food retail sector. 

“The restaurant business has a very high intensity of labour – if more people eat out, restaurateurs will have to hire more staff and invest in training,” said Indian Summer co-founder Minesh Agnihotri.  

"It is believed by leading economists that the loss to the Treasury in VAT receipts would be recouped in three years through increased Government receipts from corporation and income taxes, national insurance and a reduction in benefits – creating over 320,000 new jobs in the process."

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