Cutting tourism VAT could provide £20bn boost to the UK

By Sophie Witts contact

- Last updated on GMT

Cutting tourism VAT could provide £20bn boost to the UK

Related tags: Cut tourism vat, International trade

The campaign to Cut Tourism VAT has placed renewed pressure on the government after a study revealed that lowering the tax could be worth £20bn to the UK.

According to a report by Nevin Associates, cutting the rate of tourism VAT from 20 to five per cent would reduce the UK’s Balance of Trade deficit by £632m in year one, £1.1bn in year two, £1.5bn in year three and £20.1bn over 10 years, at 2015 prices. 

The findings follow the publication of the Cole Commission report in to exports released yesterday (24 June).

Commissioned by the former shadow chancellor Ed Balls in 2014, the report draws on the submissions of over 100 businesses nationwide to offer strategies on tackling Britain’s poor export performance.

The country’s trade deficit reached £34.8bn in 2014, the widest since 2010.

While the Cut Tourism VAT welcomed the reports’ focus on UK exports, it argued that the importance of tourism was understated.

“There is a clear and compelling economic argument for reducing the VAT on tourist attractions and accommodation," said Graham Wason, chief executive of the campaign to cut tourism VAT.

“As the third largest services export earner, tourism deserves much greater recognition for its contribution in lowering the UK trade deficit. The UK is currently ranked 140 out of 141 countries for price competitiveness in tourism – and it’s about time that tourists were given a better deal when holidaying in the UK.”

According to the group, a reduction in VAT to five per cent would raise more than £3.9bn over ten years for the Exchequer and create 123,000 new jobs, while greater spending and growth in tourism and the wider UK economy would increase UK GDP by up to £4bn per year.

Tourism is the only remaining UK export industry paying 20 per cent VAT.

Margaret Ritchie, Social Democratic and Labour Party (SDLP) MP for South Down, argued that cutting VAT for hospitality and tourism businesses would boost local economies.

“Economic and academic evidence points to how a reduction in tourism VAT would create revenue for the Treasury and also stimulate the regional economies,” she said.

The Cut Tourism VAT campaign is run by a coalition of hospitality and tourism businesses including InterContinental Hotels Group (IHG), Travelodge, Premier Inn and The British Hospitality Association (BHA).

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