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Why the BHA resigned from the VAT Club

10 February 2012

The BHA has resigned from the VAT Club to concentrate on the industry's official VAT initiative. Chief executive Ufi Ibrahim explains why

As every hospitality business leader knows, the British Hospitality Association (BHA) actively champions a competitive and level playing field for hospitality businesses across Britain. In some cases, such as in contract catering and facilities management services, the industry has to compete with public services. In an economy starved of public expenditure and in need of private sector jobs this is - quite frankly - baffling!

The VAT case is just as illogical. Britain's hotels, attractions and restaurants are at a huge disadvantage to their EU competitors. If you add to the VAT rate the impact of high visa charges and Air Passenger Duty rates, then you have one of the biggest anti-trade regimes for international tourism in the world.

An independent report by Tourism Respect and Deloitte for Bourne Leisure and Merlin Entertainments provided specific facts and figures on the return on investment which would accrue in terms of jobs and exchequer receipts from a 5% VAT rate on accommodation and attractions. In 2011, the BHA also commissioned an independent report by Tourism Respect on the impact of VAT on the restaurant sector. While the impact on HM Treasury receipts was not positive, the impact on restaurant jobs was significant.

Some people think it is not realistic to ask for a VAT rate reduction right now. But the BHA believes that we must start building for the future immediately. If Britain's tourist industry is to grow and develop, a continuing VAT rate of 20% will act as a decisive break on that ambition. Therefore, the BHA has engaged with the Treasury in a constructive and realistic dialogue on behalf of the industry. And it is these discussions which are shaping the industry's campaign led by the BHA, and which has consequently led to the association resigning from the VAT Club. There are a number of reasons for this:

 As the national trade association, the BHA is undertaking this campaign on behalf of the entire industry. It has the support of the British Association of Leisure Parks, Piers and Attractions, and of almost every major public hospitality company as well as independent operators.

 We believe there is the danger that different campaigns will be counter-productive, which is why the BHA wishes to concentrate on the industry's official VAT initiative.

 We are now working on a new research model which will bring our economic analysis on VAT in line with that of the Treasury. In this way, we can strengthen our dialogue with Government and ensure that our numbers, our recommendations and our communication with the Treasury is meaningful and impactful, rather than just "noisy".

 Finally, the BHA believes it is unrealistic to campaign for a reduction on VAT on alcohol, given the Government's ongoing concerns about alcohol issues.

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