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Reduce Tourism VAT to improve the UK’s growing trade deficit 

In response to UK trade deficit figures published today by the Office for National Statistics (ONS), the British Hospitality Association’s Campaign to Cut Tourism VAT is calling on the Government to recognise the negative impact of tourism VAT on export figures and reduce the rate of VAT on accommodation and tourist attractions from 20 per cent to 5 per cent. A reduction to 5 per cent would improve the UK's trade deficit by £22.2 billion over a ten year period. 

The ONS announced that the UK’s trade deficit for the first quarter is at its largest since 2008. As the sixth biggest services export earner, tourism deserves much greater recognition as a tool for addressing the UK trade deficit. Hospitality and tourism is the only UK industry to create one in five new jobs over the past five years, and it has the potential to contribute even further to the economy with Government support.  

Analysis by Tourism Respect and Nevin Associates reveals that a reduction in the rate of tourism VAT would also have a substantial effect on reducing the UK’s Balance of Trade deficit. Given the price sensitivity of the tourism industry, a reduction in VAT would result in an increase in the UK’s foreign exchange earnings from overseas visitors, who account for approximately 40% of all expenditure on visitor accommodation and attractions. In addition, there would be a reduction in foreign exchange expenditure by UK residents holidaying abroad.  

Dermot King, Chairman of the Cut Tourism VAT campaign and Managing Director of Butlins said: “At a time when our trade deficit with other EU countries is running at a record high level, there has never been a better time for this Government to take decisive action and reduce the VAT on tourist attractions and accommodation. The evidence behind the benefits of a reduction of tourism VAT to businesses, the national economy and British families has never been clearer. Analysis from Tourism Respect and Nevin Associates shows that reducing tourism VAT from 20% to 5% would reduce the UK’s Balance of Trade deficit by £22.2 billion over 10 years – as well as increase the tax take by £4.2bn.    

“Tourism is the UK's only major export subject to 20% VAT, double the rate of the EU average. Growing numbers of MPs are joining our call to the Treasury for a reduction in VAT on tourism exports and we now need to win the hearts and minds of the British public who don’t realise that they are being taxed harder than almost anyone else in Europe for simply going on holiday in their own country.”

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