Holiday Tax Would Hit Consumers with £1.6 billion Tax Rise
New economic analysis had found that the Government’s proposed holiday tax would shrink GDP, cause thousands of jobs losses and see the Treasury lose hundreds of millions in tax revenue.
Modelling by Oxford Economics, commissioned by UKHospitality, lays bare the devastating impact a holiday tax in England would have on holidaymakers, businesses and the economy.
Assuming the impact of a 5% levy is fully realised by 2030, the impact on the economy and consumers would be stark:
- Reduction in GDP of £2.2 billion
- £1.6 billion tax increase for holidaymakers
- £688 million in reduced tax receipts to the Treasury
- A loss of £101m in direct investment from hospitality and tourism businesses.
Hospitality and tourism would be devastated by the direct impacts the tax would have on consumers:
- £1.8 billion reduction in tourism spending
- 11.9m fewer nights spent in accommodation
- 33,000 jobs lost.
UKHospitality is calling on the Government to stop the holiday tax and protect the great British holiday. It’s urging consumers and holidaymakers to visit https://stoptheholidaytax.uk/ and write to their MP, urging them to oppose the tax.
Allen Simpson, Chief Executive of UKHospitality, said: “The numbers are clear. A holiday tax would hike costs for Brits, make staycations more expensive and decimate tourism.
“There are no winners from a holiday tax. From coastal communities and city centres to local guesthouses, pubs and taxi firms, the impacts are stark and indiscriminate. Taxes up, jobs lost and our high streets hit once again.
“Holidays are for relaxing, not taxing. The Government should keep it that way and stop the holiday tax.”
The modelling by Oxford Economics considered three separate scenarios: a 5% levy on accommodation, a £2 levy per person per night, and a £2 levy per room per night. All scenarios result in a reduction in GDP, tourism spending, nights spent in accommodation and total jobs.
Matthew Dass at Oxford Economics, said: “Our modelling shows that introducing a holiday tax would have a clear economic impact.
“Across the wider economy, the policy is likely to have negative consequences. The additional revenue generated by the tax will be outweighed by reduced economic activity, as higher costs dampen tourism demand, ultimately leading to a loss in GDP.
“With England already operating at the upper end of VAT rates, an additional tax would further weaken the country’s competitiveness relative to other destinations and place additional pressure on consumers.”
Simon Palethorpe, CEO of Haven, said: “Holidaying in the UK creates jobs, drives investment and boosts local businesses. A holiday tax will mean people take fewer UK holidays resulting in less investment and fewer jobs, often in areas where there are few alternative employment opportunities.
“In the UK, visitors are already paying double the VAT rate of the most popular overseas holiday hotspots. The UK is a great place to visit and we should be encouraging people to do so, not adding extra taxes.”
Simon Vincent CBE, President, Europe, Middle East and Africa, Hilton: “The Oxford Economics research is clear that a proposed holiday tax, on top of already high VAT, will impact British families staying in the UK and make the country less competitive as a destination.
“Tourism thrives when government and industry work together. The focus should be on growing visitor numbers and enabling hospitality to play its full role in supporting jobs, investment, and economic growth.”
Fiona Eastwood, Chief Executive Officer of Merlin Entertainments, and a Board member of UKHospitality, added: “A holiday tax increases the cost of short breaks for working families, making them unaffordable for many. Businesses in our sector will suffer; so will the regional economies we support by attracting overnight stays and tourism.
“At Merlin we’re proud of what we offer to families in the UK, but to continue to invest here, we need the economics to stack up.”