Welcome Systems is fully backing the Cut Tourism VAT campaign, because we absolutely agree with its request for the Government to reduce VAT on tourist accommodation from 20% to 5%.
Thirty-one European countries already enjoy the benefits of reduced tourism VAT. It results in more business investment and savings passed onto consumers, while UK tourism firms battle with a VAT rate which is almost double that of the European Union average.
This isn’t right; it needs to change. And although we doubt you need convincing, we thought we’d take this opportunity to summarise the campaign:
The main benefits of a reduced VAT rate
Everyone would benefit from a VAT rate reduction in tourism; there are no losers.
Even the government would enjoy greater tax revenue, with experts predicting that in the third year after its implementation, the policy would raise over £363 million for the Exchequer.
There would likely be an increase in exporting, too. Tourism is the UK’s sixth largest export earner, and a rate reduction would increase the number of exports while improving the country’s trade balance by £23 billion over ten years.
Here’s three more compelling benefits the reduced VAT rate would bring:
- Higher employment: 121,000 new jobs would be created over the course of ten years, along with far-reaching social and economic benefits
- Stronger regional investment: more investment will be generated for businesses across the country, particularly in tourist hotspots such as seasides
- Stronger international competitiveness: cheaper UK holidays should incentivise more foreign tourists to choose this country for their vacation
What role will Brexit play?
Brexit isn’t a barrier to the change of VAT rate - it can be brought into effect immediately, because there’s no requirement for legislation at EU level.
With the hospitality industry determined to respond to the challenges of Brexit, a reduction in tourism VAT may also help businesses counter the impact of loosing certain freedoms associated with EU membership, such as access to the Single Market.
Will a VAT cut help growth?
Put simply - yes! Tourism benefits communities and the economy quite unlike many other industries. In some places, it’s a primary source of employment.
A reduction in tourism VAT would support 2.4 million jobs outside of London, assist regions that haven’t recovered from the recession and offer vital support to SMEs.
The latter is particularly important, because SMEs make up 80% of all tourism and hospitality businesses. They need help from the government if they’re to grow, and a VAT cut would have a near immediate, positive impact on their ability to do so.
How would the cut work?
As previously noted, there’s nothing holding the government back - they could reduce the VAT rate tomorrow.
What’s more, it was revealed by Treasury Advisor Professor Adam Blake that a cut in tourism VAT is “one of the most efficient, if not the most efficient, means of generating GDP gains at a low cost to the Exchequer”.
The cut would also increase competition in the industry by compelling operators to lower their prices. Indeed, Merlin Entertainment and Butlin’s have already both vowed to pass on every penny of the savings to customers.
Want to know more? Simply download the official Cut Tourism VAT factsheet, which is packed full of further details.
Got something to say? Tell us what you think about the campaign in the comments section below. After all, the more noise we all make, the more chance there is that something will be done!