Call for ‘bold’ VAT cut to help save Scottish tourism firms

VAT on domestic tourism should be cut to 5% as part of a “bold” plan to rescue the industry following the coronavirus crisis, it has been suggested.

Scottish Liberal Democrat MP Alistair Carmichael said the tax should be reduced from its current rate of 20%. Many tourism businesses in Scotland will be able to reopen from July 15 as the lockdown eases.

Carmichael, MP for Orkney and Shetland, said the potential for job losses remained “severe” in the aftermath of the crisis.

He called on the Chancellor to cut VAT as part of a comprehensive plan to support the tourism sector.

Carmichael said: “In the Northern Isles and across Scotland, local hotels, B&Bs and tourist attractions play a vital role in our communities.

“The seasonal nature of tourism means that many businesses will not have the income to avoid closing down after the support packages end.

“With most of the summer already gone and many people still anxious about travel, these businesses face the prospect of ‘three winters in a row’.

“Furloughed workers have some security now but the potential for job losses in the immediate aftermath of the crisis is severe.”

He continued: “Scottish Liberal Democrats believe that our vital tourism businesses deserve a bold VAT cut – as a sensible investment to ensure future success.

“The Chancellor should make this reduction as part of a comprehensive package of measures to tackle the growing economic crisis.

“At the moment people in the UK are being taxed harder than almost anyone else in Europe for simply supporting local tourism. This simply doesn’t make sense.

“Alongside a targeted extension of the Coronavirus Job Retention Scheme specifically for those unable to reopen, this VAT cut would give tourism and hospitality a crucial boost.”

A Treasury spokesman said: “We have provided a generous and wide-ranging package of support for businesses and jobs, including our job retention scheme, bounce-back loans, VAT deferrals and protection against eviction.

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The call came as the Scottish Conservatives claimed that opening tourism businesses on July 15 – later than England’s date of July 4 – will cost the industry millions of pounds.

Previous figures for domestic tourism show the difference would cost the sector in Scotland around £11 million and hundreds of thousands of visitors, according to analysis by the party.

Statistics from VisitScotland show tourists from other parts of the UK made around 12 million visits north of the Border in 2018, two weeks of which would be roughly 461,000 visitors.

Scottish Conservative leader Jackson Carlaw said: “Even by the most cautious of estimates Scotland’s tourist industry stands to lose millions of pounds and hundreds of thousands of customers. That’s because the SNP Government is refusing to open up the tourism and hospitality industry in line with the rest of the UK.

“The damage happens now financially, but also for the future too – these are people who would have come to Scotland but are now being made available to competitors.

“If Nicola Sturgeon is insisting on this lag, then her Government needs to provide financial compensation for that delay.”

A Scottish Government spokesman pointed to comments from First Minister Nicola Sturgeon that the best way to “ensure the recovery of the tourism and hospitality sectors” is by eliminating coronavirus.