VAT should be reduced on holidays to help the tourism industry overcome the downturn in oil and gas, an Aberdeen MP has said.
A review of the impact of the tax on visitor numbers to Northern Ireland is underway following the Conservative Party’s deal with the Democratic Unionist Party.
The DUP – which is propping up Theresa May’s Westminster government after the prime minister lost the Tories’ majority after calling a snap general election – has campaigned for a freeze.
Now Tory MP for Aberdeen South Ross Thomson has backed a campaign to bring to bring the rate of VAT across the whole UK into line with competitor destinations in the European Union.
At present, Britain is one of only four countries that does not take advantage of a reduced rate, which is permitted under EU rules.
It means that British families holidaying at home or international visitors coming to the UK pay almost three times as much VAT compared to a German break, twice as much as one in Italy as well as France and Spain.
Mr Thomson said a reduction in taxes would be welcomed by the tourist trade in Scotland and in the north-east in particular.
Tourism is one of the key areas identified by local business body Opportunity North East (ONE) for expansion as the regional economy shifts away from a reliance on oil and gas.
The previous Labour led administration, in which Mr Thomson served as vice convener of finance, in the city had proposed a “tourism tax” which would have added £1 to hotel bookings.
But now Mr Thomson says taxes must be cut to boost the city’s tourist draw.
Research commissioned by the Campaign to Cut Tourism VAT has estimated that lowering the rate of tourism VAT from the current 20% to 5% could boost GDP and contribute an extra £4.6billion to the Treasury over ten years and create 121,000 jobs.
Mr Thomson said: “The UK tourism industry is currently at a competitive disadvantage to many of its rivals across Europe.
“Reducing tourism VAT would help to lower prices but also allow businesses in the sector to invest more.
“In the north-east of Scotland, we have a thriving tourist industry, but we could be doing better. This is one area that has been identified for further growth by Sir Ian Wood’s business body ONE.
“Research by the Campaign to Cut Tourism VAT has suggested there could be economic benefits in terms of job creation and GDP growth, while the overall tax take for the Treasury could also increase.
“At a time when our local economy is only starting to emerge from one of the worst downturns in its history, I am sure that this would be welcomed by the tourism sector in the north-east.
“I will be raising this issue with my colleagues in government to ask if this can be looked at in more detail.”
James Bream, research and policy director at Aberdeen and Grampian Chamber of Commerce, said: “Changing taxes and devolving fiscal power can stimulate growth. We are keen that a range of options are reviewed and this is an interesting addition to that mix.
“We are of course recommending a cut to domestic flight taxes from Aberdeen to ensure we remain competitive both globally and domestically for business, leisure and visitors arriving by air.”
