Reduced VAT on Hotel Stays?

By | Category: Travel rumblings

VAT is charged on nearly everything. And when you stay at a hotel 17.5% is payable by the hotel to the tax coffers. It is a uniform tax payable wherever you are in our countries unlike the United States where taxes vary state by state. But in France, the VAT on visiting attractions is only 5.5% and from the beginning of 2010, Germany will only charge hotels 7% VAT instead of the normal 19%.
Now 40 British M.P’s have signed a motion calling on our government to cut the VAT that accommodation providers and attractions pay.
So why should they get preferential treatment?
One argument put forward is that it will put British tourism at a disadvantage because other countries charge less and thus, important inflows of money into the UK will be reduced as visitors go to their countries instead. Another says that British tourism needs support at this difficult economic time. A third says that tourism is a major British industry and that reduced VAT will maintain jobs and even encourage new ones as a result of an increase in visitors.

Opposing these ideas is the view that a VAT reduction may reduce prices for the consumer but will do nothing to force the hotel and other accommodation industries into being as efficient as they can.  A VAT cut would help mask any inefficiencies. Another view is that any reduction would probably not put many people off a visit because the tourism appeal of different parts of the UK is what attracts people not the odd £5 saving here or there.

Which is right?

Thailand supported its tourist industry earlier this year by temporarily reducing costs and it seems to have helped but one case doesn’t make an argument. Thailand had other reasons for supporting its tourism industry after the airport and transport disruptions earlier this year.

So will the M.P’s win? Probably not because governments like to raise as much money as they can and to them, this seems a soft touch





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