Could temporary VAT reduction boost campaign for permanent change?

16 July 2020 by
Could temporary VAT reduction boost campaign for permanent change?

The tourism industry has long campaigned for reduction in VAT to boost its competitiveness with destinations across Europe.

Saddled with one of the highest VAT rates in Europe, having risen to 17.5% in 1991 and 20% in 2011, operators have argued that a reduction would increase tourist numbers and in turn create jobs and serve up an economic boost.

Despite numerous campaigns and the tabling of an Early Day Motion in Parliament in 2017 for a reduction to 5%, efforts had always proved unsuccessful.

But, last week chancellor Rishi Sunak announced a six-month cut in VAT to 5% for food, accommodation and attractions in order "to support businesses severely affected by forced closures and social distancing measures".

So far much of the debate around the cut has been around the industry divide between larger businesses, such as JD Wetherspoon, McDonald's, Pret A Manger and Nando's, who will pass on the reduction to customers through price cuts, and those who need it to help them recover from months of closure and the requirement to reopen at a lower capacity.

But, industry stalwart Harry Murray, chairman of Lucknam Park in Colerne, Wiltshire, and former Hotelier of the Year, has stressed an opportunity to showcase the impact a permanent reduction in VAT could have on the industry.

He told The Caterer: "Last week the chancellor Rishi Sunak reduced VAT from 20% to 5% and the purpose was to get people spending and to help boost overseas tourists, and kick-start the economy.

"While I can understand why operators do not want to pass this on to the customer because of their heavy losses during the past three months, it will not help campaigning for a permanent reduction in the future."

Picture: Shutterstock

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