Cutting VAT on hotels and visitor attractions would generate £3.9 billion in extra tax to the Treasury over 10 years, a new report claims.
The whole economy would also be boosted by £4 billion due to greater investment in the industry, and more than 120,000 jobs would be created in the UK, according to research by Nevin Associates, led by economist Michael Nevin and commissioned by the Cut Tourism VAT campaign.
Although cutting the tax from 20% to 5% would dent Treasury coffers in the first year, it would more than recoup the loss in the long term, the report argues.
The cut would deprive the Chancellor of £1.56 billion in VAT receipts over 10 years, according to the study. But the government would gain an extra £261 million in corporation tax as profits in the leisure sector rose and £231 million from high income tax takings as employment rose.
Lower benefit payments and the boost to the wider economy through firms supplying the tourist sector would add almost £1 billion.
The plan would also cut the UK’s £17 billion tourism balance of payment deficit – the amount spent by Britons on foreign holidays compared to that of inbound tourists.
Tourism employs more than 3.1 million people and generated £127 million of GDP last year.
Cut Tourism VAT campaign chairman Graham Wason told the Mail on Sunday: “Tourism is a great success story in the UK but it could do much better.
“It’s barmy that we are one of a very small number of countries in the EU not taking advantages of the ability to reduce VAT for the tourist industry. We’re just shooting ourselves in the foot.”
More than 60 politicians from across the UK have come out in support of the campaign.