THE Chancellor is under pressure from the Scottish Government to slash VAT to boost Scottish tourism.
In a letter ahead of the Autumn Statement next week, Tourism Minister Richard Lochhead argued the Treasury must reduce VAT for the tourism and hospitality sectors as it was during the pandemic.
The minister did not put an exact figure on how low he wanted the rate to go but noted it had been cut to as low as 5% during Covid – before returning to 20% in April last year.
According to the Office for Budget Responsibility, VAT is expected to bring in £162.2 billion this financial year, around 6.3% of the national income.
But Lochhead argued the loss to the public purse could be partly made up by the revenues generated by more demand.
In a letter to UK Tourism Minister John Whittingdale and Enterprise Minister Kevin Hollinrake, Lochhead said: “During the pandemic the tourism and hospitality sector benefited from reduced levels of VAT, 5% then 12.5%, before returning to the standard 20% rate in April last year.
“The industry continues to make a strong case for the return of a reduced rate of VAT for the sector.
“Many countries, particularly across Europe but also elsewhere, maintain reduced rates of VAT for tourism and hospitality.
“I believe the UK Government could support tourism and hospitality by looking again at a reduced rate of VAT for the sector here, and I ask you to support this and make the case for it to your ministerial colleagues, particularly ahead of the autumn Budget statement on November 22.
“This could help boost business viability in a challenging trading climate. The cost to the Exchequer of a VAT cut could be partly mitigated by stimulating demand in the sector.
“My colleague, the Deputy First Minister and Cabinet Secretary for Finance, Shona Robison MSP, has included this ask for a reduced rate of VAT for tourism and hospitality in her recent pre-Budget correspondence to the Chancellor.
“I am sure you have received similar representations to myself from the respective trade bodies across tourism and hospitality and will understand their reasons for wishing to see further help from government in this way.”
The Chancellor is also under pressure from Tory MPs to slash other taxes, including inheritance tax.
The UK Government was approached for comment.
