Cut Tourism VAT

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Thursday, 12 June 2014

Lords offer support for lower Tourism VAT in Parliament

During a debate in the House of Lords support was voiced by Peers for a reduction in Tourism VAT. Below are highlighted excerpts from the debate Lord Harrison secured on Tourism and Hospitality:

Lord Harrison (Lab): “What should be in any new tourism and hospitality Bill? First, VAT. The 2013 study by the World Economic Forum on international competitiveness shows that the United Kingdom now ranks 138th out of 140 countries on price competitiveness. The chief culprits are air passenger duty and VAT. We charge the full 20% VAT on accommodation, where the average charge of our competitors throughout the European Union is half that. We apply a full rate on restaurant meals and on admissions to cultural attractions and amusement parks. My Lords, I am not amused—especially given that research done by Deloitte’s has shown that reducing VAT on those items to 5% would boost GDP by £4 billion per annum, create 80,000 new jobs over three years and deliver an extra £2.6 billion to the Exchequer over the next decade. Why are Her Majesty’s Government so deaf to the cost of living of tourists in the United Kingdom when a change in VAT would bring the returns that I have outlined using the Treasury’s computable general equilibrium model? Do the Government “get” that inward tourism should be understood as part of our export drive? Our faltering export drive badly needs help from the tourism industry. Why do the Government hesitate to pluck the low-hanging fruit of tourism and its offer of jobs?”

The Earl of Caithness (Con): “I also support the noble Lord, Lord Harrison, on the question of VAT. It is strange that France and Germany have VAT on tourism at 7%, while ours is at 20%. If you run a small tourist business, that 20% will be very damaging to the cash flow. Fortunately, the trust of which I am a member is a charity, but if it was a pure business—if it was a hotel—that would make a huge difference to its profitability, and to the future of tourism. Surely we need more people to come to this country, so we need to make it as competitive as possible. Will my noble friend say what the Government’s thoughts are on getting rid of those barriers that both the noble Lord, Lord Harrison, and I have raised? I am sure that other noble Lords will raise it, too. How will we make the country more attractive, particularly for the high-end visitor? That kind of person will spend a vast amount of money, and he or she needs to be attracted. If that person has to pay more for a visa here, they will not come. Tourism is growth and the economy—let us back it.”

Lord Lee of Trafford (LD): “Last week the new Tourism Council was announced, focusing on employment issues and bringing together BIS, DCMS and the industry. I welcome that council—it is a step in the right direction—but I have some caveats. First, we really need a council that goes much wider and involves many more government departments. The Treasury needs to be involved because of VAT… Secondly, to succeed, the council needs to be chaired by a senior Minister—a big hitter—not one or more junior Minister. I speak from some experience, having been a junior Minister and having endeavoured to put together just that sort of body more than 25 years ago when I was Tourism Minister.”

For a full transcript of the debate go to: http://www.publications.parliament.uk/pa/ld201415/ldhansrd/text/140612-0002.htm#14061243000363

 

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