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Thursday, 29 November 2018

House of Commons host Adjournment debate on tourism VAT reduction

On the 21st of November, Alistair Carmichael, MP for Orkney and Shetland, called for an adjournment debate regarding the level of VAT on tourist related services in the UK. The debate featured MPs from across the whole of the UK, including DUP members in Northern Ireland, members from the tourist regions Devon and Somerset, and the member for Crawley where Gatwick Airport serves as a tourist gateway into the UK. Prior to the debate, Mr Carmichael wrote an article summarising the arguments in favour of a cut in tourist related VAT, which can be found here: https://www.politicshome.com/news/uk/culture/opinion/house-commons/99647/alistair-carmichael-mp-treasury-would-be-%C2%A346billion

Mr Carmichael began the debate by explaining the importance of tourism in his constituency and asked what would be the best method for allowing the industry to grow. Jim Shannon from the DUP and James Heappey, MP for Somerset, both suggested the benefits of a cut in tourism VAT, both for the tourism industry and for the UK economy as a whole. Mr Carmichael provided some specific information on the benefits of a reduction in tourism VAT, which came from the Cut Tourism VAT campaign’s research with Nevin Associates. These included the £5.3 billion gain to the Treasury over 10 years and the ‘tourism multiplier’ effect, as well as critiquing how the UK is now the only country in the EU other than Denmark that doesn’t take advantage of the reduced rate of VAT.

Mel Stride, the Financial Secretary to the Treasury, replied by firstly agreeing with the previous speakers of the importance of the tourism industry to the UK, and with the benefits that a reduction in tax rates can bring, citing the cut to business rates for smaller retailers to help high streets. He then mentioned the obstacles in the path of a cut to tourism related VAT, the most immediate being the EU regulations on variable rates. However, he reiterated the Government’s intention to continue to review the issue, and that all the points raised in the debate will be taken into consideration.

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