Cameron knocks back VAT campaign

October 3, 2013 No Comments

Boost for disabled workforceThe Prime Minister David Cameron has dashed hopes that the Government might agree to an early VAT cut to help struggling businesses in the hospitality sector, including restaurants. He admitted that the sector has made a good case for reducing VAT, but he ruled out any possibility of a lower rate in the foreseeable future.

Taking part in a live radio chat in Manchester where he was asked about the issue, he said: “There are always good cases for cutting VAT on individual items. The leisure industry and the hotel industry make a good argument but as do a lot of industries – people say why not cut VAT on repairing houses – so there are lots of arguments for cutting VAT. So people have to come up with a very good one before it gets accepted. There are a lot of things we can do to encourage tourism to make sure Britain becomes a great destination that doesn’t involve cutting VAT, which would be expensive.”
His comments follow some intensive lobbying by the hospitality and tourism industry under the ‘Cut Tourism VAT Campaign’ umbrella. The campaign has recently pointed out that the Irish tourism industry has seen a dramatic recovery following the introduction of a reduced rate for the hospitality sector. Irish VAT on the sector was cut from 13.5 per cent to 9 per cent in July 2011.
The UK is one of only a few European countries that imposes its headline VAT rate on the hospitality industry, despite a growing number of states that have successfully introduced tax breaks in recent years. Switzerland has recently extended its reduced VAT rates on tourism services for four years, for example, and Portugal is expected to implement similar concessions.
Spice Business believes that a 5% VAT rate for restaurants would help revive the industry, creating jobs and boosting VAT. It might even lead to an increase in tax collected, as a result of increased business levels. The magazine will continue to campaign in favour of this initiative and would encourage readers to do likewise.

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