Follow Europe's lead and cut VAT to 5%

25 April 2013
Follow Europe's lead and cut VAT to 5%

As support grows for a reduced rate of VAT for hospitality businesses, Caterer is throwing its weight behind the Cut Tourism VAT campaign

In September 2011, Caterer and Hotelkeeper launched its Slash VAT campaign, making the case for a drop in the rate hospitality businesses pay to just 5%.

Over a year has passed since Slash VAT began but the case was, and still is, a strong one.

The special rates of VAT hospitality businesses pay may have risen slightly in other European countries since the campaign was launched - France's hospitality businesses will start paying 10% rather than 7% from 2014 - but the UK still has one of the highest rates, at 20%. German businesses in the sector pay 7%, Spain 8% and Ireland 9%.

While the rate here has not changed, the landscape certainly has. We have been instrumental in pushing this issue up the agenda and, since we launched our campaign, serious efforts have begun within the industry to bring the rate of VAT down. Most notable of these is the Cut Tourism VAT campaign, which calls for a reduction in the rate of tax from 20% to 5% for all hotels and cultural attractions.

The campaign, led by Bourne Leisure Group, Merlin Entertainments Group, the British Hospitality Association and the British Association of Leisure Parks, Piers and Attractions, has a wealth of evidence at hand to show what the benefits of a cut could be. The headline figures are these: reducing the tax on tourism to 5% will create 80,000 jobs, many for the young and unemployed, and generate a surplus of £2.6b for the Treasury over 10 years.

It is little wonder that Cut Tourism VAT now has in excess of 500 individual hotels, attractions, restaurants, and trade associations that have pledged their support to the cause. Meanwhile, talks with Treasury officials are ongoing and hospitality businesses are being persuaded to bring up the matter of high VAT for tourism businesses with their local MPs.

It makes sense that the industry's message is as clear on this important issue as it can possibly be, and that is why we at Caterer have decided to throw our full weight behind Cut Tourism VAT, and will continue to bang the drum to make sure that the Government gives companies in this sector the best deal possible. A reduction in VAT may seem like an unachievable dream, but we believe there is a very strong economic case for the Government to do so, and we urge you to get on board, too.

The financial case for a 5% VAT rate for the hospitality industry is incontestable, says Dermot King, director of Bourne Leisure

With no sign of any significant growth in GDP, unemployment continues above 2.5 million and nearly a million young people are out of work.

The two drivers of the economy over the past 15 years - public spending and cheap private credit - are no longer there, so where can the Government find growth?

The solution would be an industry that is a proven exporter, creator of jobs (particularly for young people) and one that did not suck growth from other sectors of the UK economy.

Tourism is the third-highest exporter for the UK. It employs almost 10% of the workforce and, if our business reflects the rest of the industry, more than 60% of new jobs created go to people under 25. Furthermore, as the public sector faces job reductions, many of those jobs can be easily transferred into the tourist industry.

That is a why I welcome the news that Caterer is placing the full weight of its Slash VAT campaign behind the Cut Tourism VAT campaign.

Tourism is a highly competitive international market. Sometimes we can get carried away in thinking that the UK has a unique product to offer (and it does), but so does French, Spanish, Italian and German tourism.

The UK is relatively too expensive. The World Economic Forum rated us 138th out of 140 countries in their Travel and Tourism Competitive Index. The main reason for that is high UK taxes, notably APD, visas and VAT.

The average UK family pays about twice as much VAT as the next most expensive European competitor country and nearly three times as much as the average European competitor. So whereas the UK family spends 20p for every pound they spend on a UK holiday, a French or German family spends only 7p.

Tourism is price sensitive. I know because Bourne Leisure provides about one in every six UK domestic overnight stays.

Reducing VAT on tourism to 5% would cost the Government an estimated £1.2b in lost revenue, but that would be more than offset by gains from broadening the tax base, higher employment and therefore lower social security payments and higher corporation tax take.

There are some great entrepreneurs in the UK tourist industry; the Government's job must be to create an environment whereby they can compete and create jobs. These entrepreneurs have together created one in three private sector jobs in the past year. Imagine what we could do without one VAT-arm tied behind our backs?

How to support the Cut Tourism VAT campaign If you want to add the voice of your business to the growing number of supporters behind the Cut Tourism VAT campaign, then all it takes is a quick eâ€'mail. To sign up, go to

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