Manx vat cut gives hope to mainland
IN a move that will give hope to hoteliers across mainland Britain, the UK Government has agreed to requests by the Isle of Man for a reduced rate of VAT on hotel accommodation.
Presenting his 1994 budget last week, the Manx Treasury minister, Donald Gelling, said that the lower rate - which was being brought in to stimulate economic growth - would be applied only to "some tourism-related, non-exportable services".
The implication was that a variety of services would be eligible for the lower rate, raising hopes among the island's restaurateurs.
However, a spokesman for Customs & Excise in London said that only hotel accommodation would be included in the revised VAT levels.
Mr Gelling could not say what the new rate would be, or when it might be implemented, saying: "I am confident that we shall see a lower rate of VAT for hotel accommodation later this year."
Chief financial officer John Cashen told Caterer afterwards: "Ever since VAT was introduced in 1973 the tourist industry has felt it had a case for a reduced rate."
The Isle of Man, which is a Crown dependency and not part of the UK, levies VAT in exactly the same way as the UK under a special customs and excise agreement, and this is the first time the Government has made any concessions.
The island had originally put forward a plea for a rate reduction in order to operate on a more even footing with the Channel Islands. There, hotels compete for much of the same tourist business without the extra burden of having to impose any VAT.
While the UK Treasury would probably argue that the move is irrelevant to what happens on the mainland, the British Hospitality Association (BHA) believes it sets a promising precedent.
BHA chief executive Robin Lees said that by agreeing to the change, the UK Government had conceded that VAT of 17.5% was making the Isle of Man's tourist industry uncompetitive.
"The logical conclusion is that the UK industry, by implication, is also being made uncompetitive by the current rate of VAT," he said.
If the Government failed to grant a similar concession in the UK, Mr Lees pointed out, Manx hoteliers would be put at an advantage over competing tourist destinations on the mainland.
The BHA has long campaigned for lower VAT for Britain's hospitality industry on the basis that almost all other European Union countries apply reduced rates to hotels and restaurants.
Last month, the British Tourist Authority joined the fray, commissioning Touche Ross Management Consultants to investigate the benefits of reducing VAT rates on accommodation, meals and leisure attractions (News, Caterer, 10 February).
All parties are now hoping that the changes in the Isle of Man will help them in their continuing battle for a level playing field in Europe.
