Chancellor Rishi Sunak could be announcing temporary VAT cut for businesses in the hospitality sector as part of his summer statement later this week.
According to The Times, the Chancellor proposes a temporary cut VAT for pubs, restaurants and cafés to help to protect jobs in the sector, following the reopening of pubs and restaurants last weekend in England and Northern Ireland.
The day before the reopening dubbed “Super Saturday “ the CEO of pub group Fuller’s urged the Chancellor to cut VAT to prevent thousands of job losses across the hospitality industry, saying cutting the levy on goods and services is vital to entice punters back to their pubs and avoid wholesale redundancies.
He said that VAT should be temporarily lowered from its current rate of 20 per cent down to 5 per cent.
The Chancellor Rishi Sunak has in recent weeks faced increasing to cut VAT in his emergency summer statement on Wednesday.
Steve McCrindle, VAT Partner with Haines Watts, says: “During the last economic recession, we saw reductions in the standard rate of VAT and that could well happen again post COVID-19,” he said.We have already seen various countries bringing in measures to stimulate the economy through VAT reductions. There have been VAT reductions in a number of countries including Germany, Austria, Norway, Moldova and Kenya, usually temporary reductions with some aimed at stimulating parts of the economy those countries are renowned for.
“For example, Germany has announced an intended €130billion COVID-19 stimulus package, including a cut in the standard rate of VAT from 19% to 16% and the reduced VAT rate of 7% to 5% both from 1 July to 31 December 2020. This measure will cost Germany €20billion.”
“Germany had already announced a cut in the VAT rate on restaurant and catering services from the standard rate of 19% to the reduced of 7% between 1 July 2020 and 30 June 2021, and which will now additionally benefit from the reduction to 5% for the last six months of 2020”
There has been an ongoing campaign to cut VAT in tourism and hospitality, led by Bourne Leisure Group, Merlin Entertainments Group and the British Association of Leisure Parks, Piers and Attractions. Currently out of 36 European countries Britain Denmark and Slovakia are the only countries not to have cut tourism VAT.
In May campaign group “Cut tourism VAT” highlighted U-turn in Scotland by the SNP when it cut airport departure tax, leading to the Cut Tourism VAT campaign to reissue its call for VAT to be cut to 5% from its current rate of 20% to protect the future of Scottish tourism.
According to research halving the airport departure tax would have created almost 4,000 jobs and added an extra £1bn to the Scottish economy.
Jack Irvine, Campaign Director of the Cut Tourism VAT campaign said at the time: “The reversal of a manifesto pledge is further evidence of an administration that takes for granted the enormous contribution that tourism makes to the Scottish economy. This decision to not cut aviation tax follows quickly after the disastrous decision to press ahead with plans for a tourist tax in Edinburgh. In a time of economic uncertainty, the Scottish government should be rolling out the red carpet to tourists, rather than dreaming up ways to further erode Scotland’s tourism price competitiveness.”
