Budget Fails to Reform Major Tax on Exports
When the Chancellor of the Exchequer delivered his budget yesterday, he put in place a number of initiatives intended to support exports; however he overlooked reform of one tax that has a significant negative impact, VAT.
A fundamental principle of VAT is that it does not apply to exports. However, in one major export industry, tourism, VAT does apply – and in the UK, it does so at an uncompetitively high rate.
Because tourism is a highly labour-intensive industry and good for job creation, European law allows it a reduced rate of VAT. Virtually all of the UK’s competitor destinations (24/27 member states) take advantage of it but the UK does not. In the UK, 20% VAT is added to the price of a hotel room and a ticket to a theme park or visitor attraction; in Belgium, the Netherlands and Portugal the rate is 6%; in Luxemburg it is just 3%.
Graham Wason, Chairman, Campaign for Reduced Tourism VAT, says: “When a tourist comes to visit, he spends his foreign currency on food, accommodation, sightseeing, entertainment and in the shops. In doing so, the businesses that sell to him are all making export sales. They are also employing large numbers of relatively low paid people. As tourism is an extremely price sensitive industry, a reduction in VAT to levels competitive with all the other countries in the EU would make the UK much more attractive to foreign tourists and would create thousands of new jobs, many of which would be suitable for the unemployed. For every additional jumbo jet that arrives in the UK from China, £1m is added to the UK economy, £200,000 goes to the Exchequer and 20 full time jobs are created.”
Nick Varney, CEO, Merlin Entertainments, which owns Alton Towers, Legoland and Madame Tussauds added: “The Chancellor often talks about how he wants the UK to be tax competitive; how is it that in respect of tourism, which is such an important sector for exports and employment, he is happy to let the UK be so far behind the game? Work with the Treasury’s own model shows that a cut in the rate of VAT on tourism would actually increase revenue to the government in the medium to long term and would amount to £2.4bn over 10 years.”
About Work with the Treasury’s Own Model
For more information, including pictures and interviews; please contact: David Tarsh on +44 (0) 20 7602 5262, +44 (0) 7770 816 070 or email: David@Tarsh.com.
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