Today’s rise in VAT threatens to hit overseas holiday sales as well as UK hotels already suffering under one of Europe’s highest tax rates. The warnings have come from opposition MPs and leading accountancy firm Deloitte.
According to today’s Times Bill Dodwell, Deloitte’s head of tax policy said the rise would particularly hit higher income families.
This, he predicted, would cause them to forgo the annual holiday, among other leisure pursuits, as they face on average £600 more in taxes this year.
Labour MPs are concerned that the rise from 17.5% to 20% will put off both domestic and foreign tourists to the UK, according to reports.
Britain levies full VAT on the tourism industry while most other European countries impose a discounted tax rate on hotel rooms and restaurant meals to attract tourists.
The rate of VAT in France is 19.6% but discounted to 5.5% on hotel rooms while Germany’s rate of 19% is cut to 7%.
Shadow tourism minister Gloria De Piero reportedly said: “Tourism plays a vital role in our economic growth. The Tories should be helping the industry, not saddling it with this unfair VAT hike.”
A twice delayed tourism strategy is due to be published by the Department of Culture, Media and Sport this month in an effort to capitalise on the 2012 London Olympic Games and the Queen’s diamond jubilee celebrations.
There is also concern that the VAT hike will hit disposable income and consumer spending on travel and holidays, with research estimating that the tax rise will add £158 to essential bills for an average household.