Hospitality Industry Shows Support for VAT Rate Reduction

Pressure on government to rethink its 20% VAT rate on the UK hospitality industry is growing with a new survey from the British Hospitality Association.

The survey reveals overwhelming support for a coordinated VAT reduction campaign headed by the BHA – the aim is to force the government to rethink and reduce VAT to 5% for hotels, attractions and meals away-from-home.

“Reducing the VAT rate will also improve the UK’s international competitiveness,” explains BHA chief executive, Ufi Ibrahim.

“This country is only one of four out of the 27 EU member states which does not impose a lower rate of VAT on hospitality services. This makes the UK uncompetitive with the rest of Europe. We are effectively fighting the competition with one hand tied behind our back.”

VAT Rate: Survey Results

The survey marks the launch of new VAT pages on the BHA website (www.bha.org.uk) giving updated developments on the campaign as well as a comprehensive series of questions and answers which explain the background to the campaign and its aims and objectives. A Facebook campaign is also being launched.

The BHA’s survey reveals that members believe that the UK will gain a poor reputation for value for money if the government continues to keep VAT for the UK hospitality and attractions industry at 20 per cent and that this represents a severe barrier to growing their business.

Nearly 98 per cent say that the current VAT rate hinders the competitiveness of the UK hospitality and attractions industry; 85 per cent forecast that a reduction to five per cent would create new jobs and increase staff numbers; 90 per cent see business development opportunities following a VAT reduction.

Three-quarters (74 per cent) believe a reduction to five per cent will lead to more domestic visitors while over half (55 per cent) say it would lead to more overseas visitors. Three-quarters (76 per cent) say that a reduction in VAT will boost turnover.

Over 95 per cent will pass on all or some of the cut in VAT, if achieved, while 82 per cent will invest more in their product/facilities, 67 per cent will employ more people, 57 per cent will invest more in training; just under half (48 per cent) will increase staff wages.

Economic Benefits of a VAT Reduction

The new research also emphasised the benefits that would be brought about by a reduction in VAT for the hospitality industry.

“Experience in other countries shows that major changes in VAT rates are passed through to customers in their entirety,” continues Ibrahim.

“It’s clear that our members plan to plough the saving achieved back into their business through lower prices, greater investment, more training and higher wages.

“These findings emphasise our belief that a reduction in VAT will boost customer demand. This will lead to the creation of more and more jobs – our research indicates that 78,000 jobs will be created following a reduction of VAT to five per cent. Of course, this will lead to greater revenues to the Treasury through higher tax returns.

The story continues with the launch of a Facebook campaign and a new section dedicated to VAT on the BHA website.

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