The Nevin Report suggests that as well as £4bn increase to GDP a tax cut would result in £3.9bn gain for the exchequer over the next ten years.
It says the UK is ranked 138 out of 140 countries based on price competitiveness by the Travel and Tourism Index and is one of only four countries in Europe not to reduce tourism VAT.
The report, produced by economic forecasters Michael Nevin Associates, shows that similar cuts in France, Germany and Ireland in the last five years have been successful, and that a cut in the UK would boost investment, jobs and visitor numbers for the UK’s tourism economy.
Campaigners say cutting VAT would help stem the UK’s tourism balance of payment deficit which is currently £14bn - as more is being spent by UK residents on overseas holidays compared to tourists coming into the country. This equates to one visitor the UK on holiday for every two Brits who go abroad.
Ufi Ibrahim, chief executive of the British Hospitality Association, said: “As the driving force behind our recovery, it’s vital we help smaller firms grow. Cutting VAT to 5% not only allows the sector to be competitive with Europe, where the majority of countries charge less VAT, but it shows hard grafting businesses the Government is behind them.
“No one denies the cut would dent tax revenues initially, but this is a chance for politicians to prove they are really in it for the long by making an investment in an industry which is the UK’s biggest employer of young people.”
Speaking to the Publican’ s Morning Advertiser’s sister title M&C Report last month Ibrahim said a tax cut happening is a matter of ‘when’ rather than ‘if’, she said: “The sooner the better. We are relentless and we will continue until we get the right result.”