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Independent Scotland ‘could' cut VAT, says minister

12 March 2014 by
Independent Scotland ‘could' cut VAT, says minister

A Scottish Government minister has indicated that an independent Scotland could cut VAT on tourism.

As Scottish Tourism Week kicks off, Fergus Ewing, the Scottish Government's Minister for Energy, Enterprise and Tourism, has confirmed that an independent Scotland would reduce VAT on tourism.

He said: "Independence would allow key decisions on taxation to be made in Scotland by those who have Scotland's best interests at heart and who have a direct stake in its success."

He continued: "We are aware that other independent countries like Ireland and Portugal have cut VAT on tourism and gained considerably as a result. These are examples that an independent Scotland could follow."

The comments are significant, because a decision to reduce VAT in Scotland could push Westminster to decide to do the same in England, Wales and Northern Ireland. However, Ewing did not appear to give any guarantees.

Earlier, MPs and trade associations including the Scottish Tourism Alliance, the British Hospitality Association (BHA), and several others all expressed the view that Scotland should cut the rate of VAT on accommodation and visitor attractions from 20% to 5%.

Graeme Dey, MSP, said: "The VAT rate on tourism in Scotland and the refusal of the UK Government to cut it, is just one of many examples of why Scotland's interests would be best served by being an independent country.

Graham Wason, chairman of the Campaign for Reduced Tourism VAT, said: "If Scotland opts for independence and subsequently cuts VAT on tourism; it would benefit significantly at the expense of the rest of the UK. It would also attract more visitors from abroad, so earning export revenue and improving its balance of payments. In these circumstances, the mistake by the rest of the UK in not cutting tourism VAT would be exposed."

With a reduced rate of VAT, hotels, visitor attractions and other related tourism businesses become more competitive and attractive. They would therefore increase sales (including export sales) and so be in a position to create additional employment. Because many of the jobs created would be appropriate for a large segment of the unemployed, the government would immediately save money as a consequence of a reduction in benefits payment and take a step towards its policy of helping people in to work.

Further down track, the government would recoup the lost VAT directly from the tourism industry through increased employment related taxes and corporation taxes. It would also increase tax revenue indirectly from a positive impact on the wider economy.

Ufi Ibrahim concluded: "A tourism VAT cut has been implemented with great success in Croatia, Cyprus, France, Germany Greece, Ireland, Italy, Spain and Sweden; how is it that Westminster has not spotted it's a good idea?"

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