Mayors Challenged to Back 10% VAT as a Condition for Introducing Holiday Tax

Following last week’s announcement by the government that Mayors across England will be handed the authority to charge visitors a new levy on overnight accommodation, Allen Simpson, Chief Executive of UKHospitality, has today written to all Labour Mayors challenging them to publicly back a 10% rate of hospitality VAT as a condition for introducing a holiday tax.

Mayors frequently say that holiday taxes should be considered ‘normal’ because they exist in major tourist destinations like Paris, Rome, Lisbon, New York and Berlin.

If Mayors back a holiday tax, they should back the lower hospitality taxes which go alongside it in those countries as a condition before introducing such a tax in their area.

Following commitments from some Mayors yesterday not to implement a holiday tax higher than 5%, UKHospitality has also challenged them to commit to supporting that cap being enshrined in legislation.

In the letter, Allen wrote: “You have all said that it is commonplace around the world to have these taxes.

“But as you know, it is also commonplace for the VAT on holidays to be far lower than in the UK. In France, Spain, Germany, and Italy the VAT is 10% or lower but here we charge a full 20%.

“Indeed, the only countries who charge 20% VAT along with a holiday tax are countries trying to shrink their tourism sector.

“With this new proposal a family from Bootle visiting Manchester could face a tax burden of around 27% on their hotel stay, but a trip to Berlin would incur only 14.5%.

“I am therefore writing to you as devolution pioneers who care deeply about jobs in your community to ask that you make two commitments.

“First that you support a 10% VAT rate for hospitality to bring us in line with our major competitors and commit to not implementing a holiday tax until we have secured that change.

“Second that you support a cap in legislation on a holiday tax at no higher than 5% to prevent the inevitable creep in the level as years go by.

“This is a mainstream position to take. Cities across the world do it. And the Prime Minister agrees. In February, Andy Burnham said “I would argue for a VAT rate more consistent with what you find in Europe because of the social value that your businesses bring to places and towns that need that life injected into them”.

“Devolution is the future. But hospitality cannot afford to pick up so much of the bill. This proposal commits the Government to a joined-up package of devolution rather than simply tax rises. I hope you can join us in calling for genuine parity with Europe.”