Tourist Tax Can Only Work Alongside VAT Cut Says MP’s

APPGA report by the All-Party Parliamentary Group for Hospitality says that the introduction of a tourist tax would only work if VAT in hospitality was reduced at the same time. MPs said the UK hotel sector is already the second highest taxed in the EU, adding that in other countries where a tourist tax has been introduced rates of VAT on hospitality businesses have been lowered. There are a limited number of areas where EU rules allow governments to implement a reduced rate of VAT. In the case of tourism the United Kingdom is one of only four countries not to take advantage of a reduced rate.

This means that British families or international visitors choosing a British holiday would pay almost three times as much VAT compared to a German break, and twice as much as one in Italy, France and Spain.

Local councils have in recent years been calling for the powers to introduce a tax on overnight visitors as they struggle with funding shortfalls. According to the Local Government Association, UK councils will face a shortfall of nearly £8bn by 2025 and cannot levy any new taxes without legislation by the government in Westminster.

Steve Double MP, chair of the All-Party Parliament Group for Hospitality, said: “Our report recommends that any moves by councils across the UK to introduce a tourist tax need to be treated with caution. Local authorities must fully examine the impacts on consumers, businesses and the local economy before taking any decisions, especially in regard to the overall tax burden that is currently present on hospitality and tourism businesses.”

Kate Nicholls, CEO of UKHospitality, which acts as secretariat of the group, added: “Support for local services and communities is of the upmost importance, but it cannot be at the sole expense of one faction of hospitality. Hotels in the UK already contribute heavily in taxes and to introduce another levy on an already highly-taxed industry is cause for concern.

“It is also important to note that home-sharing platforms such as Airbnb will always be outside of this tax, meaning that hotels will be hit hardest. The latest findings highlighted in the report also go as far to show that the introduction of a tourist levy would discourage visitors. Local authorities need to press pause on this dash for cash and properly revaluate the wider impacts of a tourist tax.”

Earlier this year Edinburgh became the first UK city to vote in favour for the introduction of a tourist levy known as the transient visitor levy (TVL)., with councillors in Edinburgh backing the plans by 43 votes to 15.