By Dennis Petri, Chair of UHY International, the international accountancy and consultancy network (www.uhy.com )
The coronavirus pandemic has had a devasting impact on the tourism sector with international tourism expect- ed to decrease by 80% across 2020, according to the OECD.This has meant that Governments have had to intervene and support struggling sectors with a variety of measures including tax cuts, furlough and new funding initiatives. In fact, our research shows that the UK is doing more to help its tourism industry than most other European countries. But should the Government be doing more?
Our new study shows that a tourist in the UK pays just 7.8% in tax ($19.90) on a typical daily spend of $255 compared to a European aver- age of 11.3% ($28.85). Across the 25 countries in UHY’s study, the UK’s low taxes on tourism ranked it 21st for tax paid as a percentage of a tourist’s typical daily spend.The study measured the tax paid on a number of everyday purchases made by tourists – one night in a four-star hotel in a major tourist city to the value of $150, a meal for two in a restaurant at $75 and a bottle of wine valued at $30.
The UK’s position as a leader in low tax rates for the tourism industry is thanks only to an emergency cut inVAT during the pandemic.With the rollout of the COVID vaccinations and the third wave of lockdowns across Europe, we will soon be approaching the key Easter and Summer periods for the tourism and hospitality sectors.
However, with many more hospitality businesses having to close due to this latest stage of coronavirus restrictions, the government could do more to help the sector now. It should be considering the extension of the reduced VAT rate past March to make the UK an attractive place to visit for foreign tourists as international travel reopens.
The UK Government should also consider extending the VAT cut to cover alcoholic beverages to ensure that the UK’s leisure and hospitality industries recovers swiftly once lockdown ends.Around 64% of the UK’s 47,000 pubs in 2019 were ‘wet-led,’ meaning most of their earnings came from alcoholic beverages rather than food. This VAT cut would help boost the takings of the 3,000 pubs and thousands of bars and restaurants that rely on alcohol sales to stay afloat when they can reopen.This will also boost secondary industries such as breweries and distributors who have been hit by the closure of the hospitality sector over the past nine months.
Tourism and hospitality are key sections of the economy.According to the Department for Digital, Culture, Media and Sport in 2019, the hospitality and tourism workforce makes up 8.4% of UK employment.The sectors delivered GBP66bn in Gross Value Added contributions and employed around three million people. According to the 2020 EIR, UK tourism generated near £200bn GDP or 9% of the UK economy.
There is a myriad of options available to the Government to support both tourism and the hospitality sectors. A return of the Eat Out to Help Out scheme when the vaccination programme progresses, extended furlough support and job retention bonuses are all viable options that should be considered to support this part of the economy.
The British Beer and Pub Association and UK Hospitality have both called on these kinds of measures, as well as grants for wet-led pubs and extending the business rates holiday into 2021/22 for businesses in the sector.The Government should be utilising every measure possible to ensure the survival and growth of the tourism and hospitality sectors, starting with an extension of the VAT cuts.