Minister rules out tourism tax cut

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The Tourism Minister has ruled out any prospect of a VAT cut for the hospitality industry, revealing the Treasury is “unconvinced” of the case for lowering taxes in line with Europe.

Hugh Robertson told the Yorkshire Post that his Government is sceptical about whether a reduction in the VAT paid by hotels, bed-and-breakfasts and cultural attractions would ultimately be passed on to tourists; and that he himself was not convinced lower VAT rates would attract visitors from abroad.

The tourism industry has been lobbying the Government to offer a VAT discount for visitor accommodation and attractions, so bringing prices more in line with countries such as France, Ireland, Spain and Italy – all of which enjoy rates of 10 per cent or less.

The Cut Tourism VAT campaign claims reducing tourism taxes from the current 20 per cent to 5 per cent would generate an extra £2.6bn for the Treasury over the next decade in the resultant visitor boom, creating an additional 80,000 jobs across the UK.

Such a move would have widespread support in Yorkshire, where tourism remains the region’s third-biggest employer.

But Mr Robertson made clear the Treasury is not convinced.

“We have looked at this very carefully,” he said. “Certainly, as the Minister responsible for the tourism, I am very conscious of the need to do everything we can to provide a positive stimulus.

“I think the Treasury is as yet unconvinced that if it allowed people to cut VAT, that would necessarily bring the prices down.

“That wasn’t always the case in France (which has cut VAT for the tourism industry). Quite a lot of people kept the prices where they were, and kept a larger slice of the profit.”

Mr Robertson said he did not believe reduced VAT would attract extra visitors from abroad, describing favourable exchange rates as a bigger “pull factor”.

“I’m not sure many people look at the differential VAT rates before deciding where to go on holiday,” he said.

Rural campaign groups, however, argue cutting tourism taxes would help boost the countryside economy, which has been badly affected by the economic crash and cuts to council budgets.

Dorothy Fairburn, regional director of the Country Land and Business Association North, said: “Tourism is a major source of diversification for farmers, as well as being the primary business for many who live in the rural North.

“The increase in VAT to 20 percent – the highest in Europe – has severely restricted the viability of rural tourism businesses and disadvantaged Britain compared to our European competitors.

“This prohibitively high rate makes tourism overly expensive for many prospective visitors. It also discourages farmers from diversifying into rural tourism, because it makes sense for them to be VAT-registered for their farming activities but not for working as relatively small-time tourism providers.”

But Mr Robertson said the Treasury believes investing in key infrastructure such as high-speed rail will have a greater impact.

“We do want to do things as much as we can to stimulate the tourism economy – it’s just a question of finding the right means of doing it,” he said.

“We’re very, very aware that if you’re going to get more tourists out of London and into the regions, that relies on infrastructure.

“If you make it easy for people, if they suddenly wake up to the fact you can (travel to the regions quickly) ... then they will do it.

“One of the arguments going on around the whole growth agenda is whether we could release some money for infrastructure improvements. The importance of tourism in all of that is something we are pushing very hard indeed.”