The Chancellor of the Exchequer’s decision not to reduce tourism VAT in his first Autumn Statement is a “missed opportunity”, the Campaign to Cut Tourism VAT has said.
In his speech, Philip Hammond announced plans to reduce corporation tax but did not announce plans to cut the domestic tourism VAT rate, which at 20% is double that of the European average.
It comes after global hotel data firm STR and The Independent, reported that hotel bookings in London have fallen “dramatically” to their lowest level since the start of the financial crisis in 2008.
Meanwhile, a recent PwC analysis for the British Hospitality Association (BHA) reported that if the rate of VAT on UK tourism was reduced to 5%, domestic tourism could increase by up to 10%. This would translate into £8bn less being spent by UK residents on foreign holidays.
Dermot King, chairman of the campaign, said: “The Chancellor has clearly missed an opportunity to reduce tourism VAT and support British tourism businesses and the 4.5 million people that work in them.
“UK resident’s already spend £14bn more on foreign holidays than is spent on tourism in the UK, and with the UK’s balance of trade deficit at around £12bn the campaign is calling on the government to do all it can to support our domestic tourism industry.”
Hospitality and tourism is the UK’s fourth largest industry representing 10% of GDP, and hospitality alone accounted for one in five of all new jobs created in the UK between 2010 and 2014.
Ufi Ibrahim, chief executive of the BHA, added: “The government missed a wonderful opportunity to bolster hospitality and tourism – the UK’s fourth largest industry and employer of 4.5m people – by refusing to cut VAT on tourism.
“It is a sure fire way to encourage more people, both domestic and foreign, to enjoy holidays here and would make the UK more competitive with our European competitors, the vast majority of whom have lower tourism VAT rates than us.”
