Comment: VAT tourism cut would boost economy

Street entertainers perform on the Royal Mile. Picture: Getty
Street entertainers perform on the Royal Mile. Picture: Getty
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A CUT in the VAT imposed on the tourism sector to five per cent would pay massive dividends for the wider economy across the UK, says Marc Crothall

With less than a month to go until Budget Day, many businesses are considering just what its impact will be. For those of us in Scotland’s tourism industry, the timing is particularly pertinent, following shortly after Scottish Tourism Week, which starts on Monday.

In recent years, Scottish Tourism Week has grown to reveal an industry that increasingly speaks as one. It was with this loud voice ringing in my ears that I wrote to the Secretary of State for Scotland to highlight priorities for the forthcoming budget.

The Scottish Tourism Alliance is a leading voice in Scotland supporting the British Hospitality Association-initiated campaign to cut tourism VAT to five per cent.

To some this may seem radical but not when viewed in an international marketplace. The UK is one of only three EU states not to take advantage of a reduced rate of VAT on visitor accommodation and the only major EU tourist destination not to benefit from a reduced rate of VAT for tourism. Indeed, tourism is the only export industry in the UK that is subject to VAT.

I’m pleased to say that this campaign is gaining increasing support from MPs.

But then it’s no wonder when you look at the facts: the benefits to the wider economy are overwhelming. This research demonstrates that a reduction in VAT charged on tourism would contribute £3bn to the UK economy, while the UK Government’s own model shows that a reduction in VAT on visitor accommodation and attractions is a more efficient way of generating jobs and growth than any other measure, including reduced corporation tax, lower fuel duty or reducing the general VAT rate.

The tourism industry has committed to supporting this policy by creating jobs for 10,000 long-term unemployed as workers. Leading campaign supporters are also willing to pass on the whole of the VAT cut in the form of lower prices.

Reducing VAT on UK tourism has been shown to stimulate both domestic and overseas demand leading to expansion of the sector, the creation of jobs and a fiscal return that would reverse the long-term trend of Britain’s worsening tourism balance of payments. There’s never been a better time to recognise tourism as the key economic driver it is and to support an industry that really is everyone’s business.

• Marc Crothall is chief executive of Scottish Tourism Alliance