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Annual Review 2015

Value added tourism

Encouraging Brits to holiday in the UK.

The Research

When choosing holiday destinations, one of the factors that influences tourists’ decisions is the price of the holiday. Since 2009, European Union rules have allowed member states to reduce the level of value added tax paid on tourism services, however, the UK remains one of only three countries in the EU that have not reduced VAT on tourism. UK tourists, encouraged by lower prices, and factors like climate and cultural conditions, are choosing to holiday abroad and the result is that British tourist resorts are losing out.

Professor Adam Blake at Bournemouth University has been conducting a research project for the Cut Tourism VAT Campaign to investigate the economic consequences of reducing VAT on tourism services in the UK. Using a model very similar to the economic model used by HM Treasury and HM Revenue & Customs to analyse taxation policies, it examined the effects of reducing VAT on accommodation and visitor attractions.

The economic modelling showed that reducing rates of VAT on tourism will lead to a substantial positive impact on UK Gross Domestic Product (GDP) and is a more effective way of stimulating GDP than other tax measures, including corporation tax reductions that have been introduced since 2010.

Results from the project have been presented to HM Treasury and were the subject of a parliamentary debate. Professor Blake was also questioned about his results in front of a House of Commons select committee, which led to an Early Day Motion in the Houses of Parliament. Since then, a House of Commons all-party parliamentary group was formed to support a reduction of VAT for tourism services in the UK. With the group’s help the research could inform policy change and benefit the UK tourism industry, bringing British seaside resorts back to life.    

The Academic

Professor Adam Blake, Professor of Economics & Econometrics and President of the International Association for Tourism Economics 

Working with the Cut Tourism VAT campaign group was a fantastic opportunity to conduct research that has the potential to make a real change to government policy and to the lives of many people working in the UK tourism industry. It demonstrates how universities can provide rigorous research that is important to the outside world and prevents academics from being isolated from the concerns of industry and government. The fact that the project has had such an impact on the public policy debate is in itself a testament to the strength of the argument for reducing VAT on tourism services, but also to the benefits of academic and industry collaboration.

The Impact

Ufi Ibrahim, Chief Executive Officer at British Hospitality Association 

Professor Adam Blake’s research concludes that the UK is missing out on a huge economic opportunity because of a tourism VAT rate twice the EU average. A reduction in tourism VAT is one of the most effective ways of boosting the economy and the cut would enhance the UK’s competitiveness helping reduce the UK tourism trade deficit. The research has underpinned the British Hospitality Association’s grassroots campaign, supported by over 120 MPs and local Councils across the UK, calling for action to cut tourism VAT.