Tourism VAT cut could improve UK’s £13bn trade deficit

A reduction in tourism VAT would improve the UK’s growing trade deficit, the British Hospitality Association (BHA) has said.

The BHA and the Campaign to Cut Tourism VAT have both called on the government to recognise the negative impact of tourism VAT on export figures.

The call comes after the Office for National Statistics (ONS) found the gap between imports and exports for the first three months of 2016 stood at £13.bn – up from £12.2bn on the same period last year.

The associations have urged the government to reduce the VAT rate on accommodation and tourist attractions from 20% to 5%. which they said would improve the UK’s trade deficit by £22.5bn over a ten year period.

Analysis by Tourism Respect and Nevin Associates found that a reduction in the rate of VAT tourism would have a “substantial effect” on reducing the UK’s Balance of Trade deficit.

The research revealed a reduction in VAT result in an increase in the UK’s foreign exchange earnings from overseas visitors and a reduction in foreign exchange expenditure by UK residents holidaying abroad.

Dermot King, chairman of the Cut Tourism VAT campaign and managing director of Butlins said: “The evidence behind the benefits of a reduction of tourism VAT to businesses, the national economy and British families has never been clearer.

“Growing numbers of MPs are joining our call to the Treasury for a reduction in VAT on tourism exports and we now need to win the hearts and minds of the British public who don’t realise that they are being taxed harder than almost anyone else in Europe for simply going on holiday in their own country.”

He added tourism is the only UK major export subject to 20% VAT, which he said was double the rate of the EU average.