In the wake of a new report which says cutting the value added tax (VAT) rate on visitor accommodation and attractions would massively boost the UK’s tourism economy, Merlin CEO Nick Varney has said that the current VAT rate is at present a "disadvantage" to British tourism.

The Nevin report, commissioned by the Cut Tourism VAT Campaign, says that a VAT reduction from 20 per cent to five per cent for tourism businesses would provide a £4bn (US$6.7bn, €5bn) boost to the UK economy, create 120,000 jobs and put the UK back on a level footing with European tourism rivals.

The Cut Tourism VAT Campaign has been gathering steady momentum in recent months. A February debate on the matter at the Houses of Parliament saw a number of MPs speak out in favour of the cut, while the campaign has received substantial national newspaper coverage, with Britain’s best-selling daily newspaper The Sun offering strong support.

The Nevin report is due to be submitted to the government this week and Merlin Entertainments CEO Nick Varney appeared on BBC Radio 4’s Today programme this morning (30 July) to reiterate the case.

“Tourism is an export industry with massive benefits to the economy in terms of GDP and job creation,” said Varney. “Every other government in Europe gets that and has applied a discretionary rate on VAT for accommodation and attractions. Because our government is one of the few that hasn’t, it puts British tourism at a relative disadvantage.

“We were challenged to prove the benefits (of the VAT cut) to the economy, so we put the case through the government’s own treasury model and Professor Blake (a treasury advisor) concluded it was the most effective discretionary tax rate he had ever seen put through the government’s own treasury model.”

Britain is now one of only four European countries to not have cut holiday taxes – and one of them, Lithuania is cutting its VAT next year.

While the UK government insists on charging all holidaymakers 20 per cent VAT, countries like Portugal, Holland and Belgium levy just six per cent tax on all hotels, holiday camps and tourist attractions.

France and Spain charge 10 per cent tax on staying in hotels and holiday parks, while VAT in German hotels is just seven per cent.

Advocates say the cut would lead to a gain of around £4bn (US$6.7bn, €5bn) for the exchequer over 10 years.

Varney and the Merlin team were the subject of an in-depth and exclusive profile in the Q1 edition of Attractions Managment entitled How to build a $6bn company. To read the piece, click here.

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