Wednesday, 6 November 2013

VAT in the tourism sector

Treasury adviser Prof Adam Blake has calculated that cutting VAT in the tourism sector to 5% could boost GDP by £4 billion a year, creating up to 80,000 jobs over 2-3 years.


Tourism, of course, is a major industry in the UK.


VAT is an EU-led tax, and the recent increase that we have seen (from 17.5% to 20%) is the result of a long held desire to harmonise VAT across the EU. Member states do of course have derogations, although the European Commission is keen to stop this.


Britain could reduce VAT in this sector if it so wishes. In fact, only 4 member states, Denmark, Lithuania, Slovakia, and ourselves do not take advantage of a reduced rate on tourist accommodation. VAT on restaurant meals and admission to amusement parks could also be reduced.


The government has an opportunity to boost tourism and create jobs easily and cheaply.  The biggest challenge we are facing is youth unemployment, and the tourist industry employs a disproportionate number of workers under 30 – 44% as compared to a national average of 24%.


It's an open goal, Mr Cameron!