Cutting tourism VAT could end UK's £13bn trade deficit

By Sophie Witts contact

- Last updated on GMT

Cutting tourism VAT could end UK's £13bn trade deficit

Related tags: Tourism vat, Cut tourism vat, Tourism vat campaign, International trade

The British Hospitality Associtaion (BHA) has ramped up calls for the Government to cut the rate of tourism VAT to fix the UK’s increasingly dire trade deficit.

According to figures from the Office for National Statistics (ONS) released this week, the gap between imports and exports for the first three months of 2016 rose to £13.3bn.

It is the UK’s largest trade deficit since 2008, with one analyst describing the figures to the BBC as ‘truly horrible’.

However, a study by Tourism Respect and Nevin Associates claims that cutting taxes on hotels and tourist attractions from 20 to five per cent could reduce the trade deficit​ by £22.2bn over a ten year period.

Tourism is the UK’s only major export subject to the 20 per cent rate, which is double the EU average.

The BHA said making it cheaper to stay in the UK would increase revenue from overseas tourists and encourage more Brits to holiday at home.

Dermot King, chairman of the Cut Tourism VAT campaign and managing director of Butlins, said​“The evidence behind the benefits of a reduction of tourism VAT to businesses, the national economy and British families has never been clearer.

“We now need to win the hearts and minds of the British public who don’t realise that they are being taxed harder than almost anyone else in Europe for simply going on holiday in their own country.”

Do politicians care?

A cross-party group of MPs set up a lobby group last year​ to put pressure on the Government to make the change.

The cause also has the backing of Liberal Democrat leader Tim Farron​ - who is MP for Westmorland and Lonsdale in Cumbria.

However, the Cut Tourism VAT campaign has expressed concern that neither Labour nor the Conservatives pledged to address the issue in their 2015 election manifestos.

Chancellor George Osborne faced criticism from the hospitality industry for failing to mention the tourism tax​ in his March Budget this year.

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