Scottish politicians and business leaders are calling for VAT reductions on the tourism sector in a bid to drive investment and increase revenue from tourism, via the CUT Tourism VAT campaign. The campaign wants to encourage more people to visit the country, and at the same time make UK tourism as competitive as Europe.
How can we compete when many EU nations pay just 5% VAT on tourism?
Many EU nations pay just 5% VAT on tourist accommodation and attractions. Research highlights the fact that cutting the VAT rate – which is perfectly legal and possible under EU law – would attract more tourists and boost employment in the sector. The campaign is being supported by countless local and national businesses with an interest, all of whom would love to see a level playing field with European tourist destinations.
Government support only benefits London
David Cameron has promised to support tourism, but many critics feel that while London has benefited, the effect has stopped there. Some places have even seen a decline in visitors, probably because the recession is coming to an end and people are flocking abroad for their holidays once more.
VAT cut could drive 80,000 new jobs and £2.6bn to £4bn extra revenue
Campaign supporters say a VAT cut would lead to lower prices, more investment in tourist facilities, increased employment, more visitors and more revenue. And the stats back them up. A 2011 Deloitte study revealed reduced VAT rate would create as many as 80,000 new jobs and drum up a massive £2.6bn for the treasury over a decade, numbers not to be sneezed at.
Another study, this time by the treasury adviser Professor Adam Blake in 2012, said cutting VAT on tourism would add a seriously impressive £4bn a year to Britain’s GDP. The report also said that cutting VAT for tourism would be “one of the most efficient, if not the most efficient means of generating GDP gains at a low cost to the exchequer.”
As Graham Wason, the chairman of the CUT Tourism VAT campaign, said, the growth of Scotland’s tourist industry is “being hampered by the startling anti-competitive stance we have at the moment with such high levels of VAT relative to other EU states.” Is this another example of HMRC cutting off its nose to spite its face? And should the government start taking notice of the experts rather than ignoring their research?