Tag Archives: vat

Eluned Parrott AM writes…Tourism tax reduction will boost economy and create jobs

Tourism is a major part of our economy, and one of the few industries which truly covers the whole of the UK. There isn’t a single Parliamentary seat which doesn’t benefit from tourism and it’s a sector with great potential for growth.

As Liberal Democrats I believe we should use the levers at our disposal to stimulate the economy and create opportunities for people to get on in life, no matter where they live. That is why, as a group of local parties from across the UK, we have brought this motion to conference. By reducing VAT to 5% for tourism businesses – bringing the UK into line with most of our European neighbours – we could do exactly that.

British tourism is at a competitive disadvantage, being perceived as an expensive holiday destination when compared to other EU countries. The impact of this on our tourism businesses is that it encourages UK customers to holiday abroad and deters visitors to the UK.

But price sensitivity in the tourism industry also acts in subtler ways. With UK hotels seen as more expensive than continental ones, visitors to Europe from the US and Far East spend less time here, ticking off the major sights in London and never stepping beyond the capitol. The higher upfront cost of staying here means that businesses in other parts of the UK don’t benefit, and those visitors that do come spend less in restaurants, shops and visitor attractions because they simply aren’t here very long.

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Conference Countdown 2015: Cutting VAT for tourism would be a costly mistake

In the run-up to Autumn Conference in Bournemouth, we’ll be looking ahead to examine the highlights in the debating hall, the fringe and training rooms. You can find the papers here. You can find all the posts in the series here.

One of the motions at conference is for reducing VAT on tourism as far as possible. Here’s why that’s a bad idea.

The idea is to reduce VAT on hotels and selected attractions from the standard rate of 20% to 5% – the minimum allowed by the EU. This is something the British Hospitality Association has been lobbying the Treasury on for years. The motion refers to the importance of tourism more generally, with figures that include all restaurants, pubs and outbound flights, amongst other things, but I assume its VAT proposal is (mercifully) more limited.

The government’s response to this lobbying (under both Labour and the Coalition of which we were a part) has been to point to the substantial price tag. The cost of cutting VAT for accommodation alone would be £2 billion a year, with amusement parks and similar adding another £200 million. This is serious money. A comparable total would be the cost of the Pupil Premium that Lib Dems fought so hard to introduce.

Posted in Conference, Events and News | Also tagged , and | 22 Comments

The Sun calls for a VAT cut on UK holidays

stephen gilbertAfter the energetic debate in these columns over the photo of Nick Clegg holding the free World Cup edition of the Sun, it is, shall we say, interesting to be able to report a Lib Dem MP praising that newspaper for a campaign it is running.

Stephen Gilbert, the MP for St Austell & Newquay, in the holiday county of Cornwall, is quoted as supporting the Sun’s petition to cut VAT on holidays in the UK. He says:

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George Lyon MEP writes…Brave mountain rescue teams should not have to pay VAT on essential, lifesaving kit

We were navigating in near zero visibility in a white-out.

As I was navigating I put my foot out and onto nothing, and fell down about 800ft of sheer cliff.

You figure you have had it.

These are the words of 25 year old Scot Ollie Daniel, who plunged through snow while walking in the Cairngorms in January this year.

In Scotland we are lucky to have some of the most dramatic mountain scenery in the world. Walkers and climbers are a common sight in the Highlands and Islands all year round. But we know that these activities are not without risk.

Ollie was rescued …

Posted in Europe / International and Op-eds | Also tagged , , and | 5 Comments

Opinion: In defence of consumption taxes

MoneyWhenever the “cost of living” comes up as a topic, we often hear lists of consumption taxes that can be reduced to lower it. Most recently have been the green levies on energy bills; last year a big deal was made about fuel duty; the year before it was the top rate of VAT.  Some people even argue that taxes on cigarettes and alcohol hit the poorest and should be cut back.

I’m certain that there’s all sorts of taxes that we’d like to lower, but there’s no such thing as a free lunch, and any tax we lower requires us to raise another tax or cut spending elsewhere. Wealth taxes, and even a high rate of land value tax, would only raise so much, so if we’re to cut tax then we’re going to have prioritise.

My position is: whichever consumption tax you’d like to reduce, we’d be better off using the revenue to raise the Income Tax and Employee NI thresholds. This is for three reasons:

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Ed Balls shifts Labour’s position closer to the Lib Dems: is this the start of a Lib-Lab realignment?

Ed Balls and Vince CableEd Balls’ speech to Thomson Reuters yesterday grabbed headlines for its concession that paying a winter fuel allowance to the wealthiest 5% of pensioners could no longer be justified. The likely saving — at c.£100m a year, no more than a rounding error in the national accounts – may be modest, but the symbolism is significant.

This is Labour accepting (at long last) the new normal of austerity: current departmental spending will continue to be reduced in the next few years even as the long-hoped-for economic …

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Labour’s VAT cut: bad economics and disingenuous politics

In the run-up to today’s county council elections, Ed Miliband has been taking to a wooden pallet in towns and villages around the UK, telling anybody who would listen about Labour’s plan to rescue the British economy by temporarily reversing the 2.5 percentage point increase in the rate of VAT.

Desperate, though, to avoid admitting this would involve a significant increase in borrowing, he’s been telling us that this would actually be a free tax cut because the economic growth that resulted from it would increase revenues by more than the upfront cost.

That unlikely-sounding claim was given short shrift by …

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Opinion: Scrap the tax on e-books

A liberal success over many decades has been to protect the tax-free status of books and newspapers. A tax on books would be abhorrent as it would be a tax on free speech.

A democratic, civilised society requires the free exchange of ideas, information and art in books. Books are vital for people, young and old, who wish to educate themselves and improve their prospects.

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How much chocolate can you put on a gingerbread man before he becomes standard-rated for VAT?

You may not have considered this question before, so I’ll give you a little time to ponder it.

So, got your answer?

Here’s the official one from HMRC: standard-rate VAT applies to “Gingerbread men decorated with chocolate unless this amounts to no more than a couple of dots for eyes”.

But, but, but… what if the eyes are not chocolate and instead the gingerbread man has a couple of chocolate buttons instead? And what if, hurtling dangerously out of the 19th century, the gingerbread man is actually a gingerbread …

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The problem with the pasty tax? It’s not had enough media coverage

No really. Despite the rush of politicians to recall when they last had a pasty or to be photographed eating one (me? south London, last weekend, Greggs, branch still open, no photo available), the problem is we’ve not had nearly enough media coverage of the pasty tax proposals.

“What?!?! Not enough coverage?!?!”, you might well wonder. But bear with me.

Posted in Op-eds | Also tagged and | 8 Comments

What Liberal Democrat members think of different tax policies

Lib Dem Voice has polled our members-only forum to discover what Lib Dem members think of various political issues, the Coalition, and the performance of key party figures. Some 550 party members responded, and we’re currently publishing the full results.

Cut income tax and VAT but raise taxes on property: that’s the message from Liberal Democrat party members in our latest survey. Some answers to our tax questions are unsurprising, such as the North Korean style (or, for older readers, the Albanian style) majority in favour of raising the personal allowance threshold for income tax to £12,500, approximately equivalent to what a …

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Opinion: A brave tax proposal

Back in June Mark Pack suggested that now is a good time to start debating tax ideas for the next manifesto. So, let me throw in two ideas: one brave, one not so brave.

Ready reckoners published online by HM Revenue & Customs make it easier to play the role of armchair Chancellor, so that is exactly what I am going to do.

My first idea is to increase inheritance tax by 5% to 45%, raking in an extra £350m, and then spend £300m of that to cut the reduced rate of VAT to 4%.

Posted in Op-eds | Also tagged and | 16 Comments

Opinion: A hurting Lib Dem and the stagnant economy

For the first time since his election as leader of the Labour party, I found myself agreeing with Ed Miliband during Prime Minister’s Questions this week.

With his new Shadow Chancellor sat next to him and in response to the news earlier in the week that the economy had contracted by 0.5% during the final quarter of 2010, Miliband urged David Cameron to think again over the upcoming spending cuts and VAT rise.

To make matters worse for the Coalition, the outgoing director-general of the CBI accused the government of putting politics before growth. Sir Richard Lambert argued that “politics …

Posted in Op-eds | Also tagged and | 126 Comments

The VAT rise: a refresher course for Labour

Today’s increase in VAT from 17.5% to 20% — announced in the Coalition’s emergency budget last year — has triggered a fresh burst of opportunism criticism from Labour. The “wrong tax at the wrong time” claims their leader Ed Miliband.

How Labour’s last Chancellor backed a VAT rise

I suspect there’s a Labour MP we won’t be hearing from today, though: Alistair Darling*, Chancellor until the party’s defeat in May. As Mark Pack noted here last July, Mr Darling was a strong advocate of increasing the rate of VAT in order to tackle the UK’s massive deficit, with The …

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The IFS answers… Is increasing VAT progressive?

For the final part in our question and answer series with the IFS on a range of questions about their views on government policy it is the turn of VAT. The impact of increasing VAT is an issue on which I’ve changed my mind. I used to think that increasing VAT was a bad idea because it would be a regressive tax change. But when the issue shot up the political agenda earlier this year, it was the IFS’s reasoning that made me doubt that. Here is the current version of that reasoning (which of course is subject to the same …

Posted in News | Also tagged | 71 Comments

How regressive is the VAT rise?

Labour had been considering it for months before the General Election. The Coalition decided it was necessary after they’d seen the books – much to the discomfort of many Lib Dems. It’s the VAT rise – to 20% on 1st January 2011.

Many people have said that it’s a regressive tax and we should have increased basic rate income tax instead, suggesting that would be fairer.

Is that really true? Partly, but in reality the case is less clear cut.

We don’t pay VAT on food, children’s clothes, books, newspapers, magazines or sporting activities nor will the VAT rise affect …

Posted in News and Op-eds | 94 Comments

Lib Dem Tim Farron leads campaign for charities VAT exemption

Third Sector reports:

A Liberal Democrat MP is campaigning to win exemptions from fuel tax and VAT for mountain and cave rescue teams. Tim Farron, the party’s MP for Westmorland and Lonsdale, wants the coalition government to provide rescue teams with a VAT refund each year – a policy that was part of the Liberal Democrat manifesto.

“We’re hopeful,” said a spokesman for Farron. “We’re still awaiting a response from the Treasury, but this is something we can make a strong case for. These are emergency services, and they should be treated differently.”

Andy Simpson, a volunteer with Mountain Rescue, said that

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When is a rebellion not a rebellion?

The Coalition decision to raise VAT was, by some measure, the most controversial aspect of the Government’s first budget. In our recent survey of party members, 42% opposed the move, though 48% endorsed it (however reluctantly) to deal with the deficit.

The party’s MPs have also been wrestling with the issue. The VAT increase was debated on Tuesday night in the Commons – in the end only Colchester’s Bob Russell from the Lib Dems voted against the Government, siding with a Labour amendment.

As Jim Pickard in the FT notes, St Ives MP Andrew George, and four other Lib …

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Alistair Darling wanted to raise VAT

Throws a bit of a spanner in the works of the Labour rhetoric about how awful anyone who contemplates raising VAT is:

Amid reported wrangling between No 10 and the Treasury, Lord Mandelson suggested in his memoir that Mr Brown rejected a proposal from the chancellor to raise VAT while Mr Darling quashed calls for any future VAT rises to be ruled out. (BBC)

Mandelson writes that Brown and Darling rowed over economic strategy. He “vetoed point-blank” a proposal from Darling to raise VAT up to 18% or 19%. The then chancellor then blocked a proposal from Brown to rule out

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Opinion: A Cornish perspective on the Budget and VAT

As MP for the West Cornwall and Isles of Scilly constituency of St Ives, I am fortunate to represent one of the most spectacular and attractive parts of the UK. However, it is also the poorest region in the country. So Budget proposals are critical to many of my constituents who exist with the reality of low incomes and relatively high living costs.

On a positive note, the Budget put forward by the Coalition Government has much to commend it and for the Liberal Democrats, in particular, to be proud of.

It contains policies the party campaigned for, including: an increase in …

Posted in Op-eds | Also tagged | 18 Comments

Two Lib Dem MPs rebel over VAT

The Guardian:

The coalition faced its first rebellion last night when two Liberal Democrat MPs voted against a budget proposal to increase VAT to 20%.

Bob Russell and Mike Hancock voted with Labour to oppose the increase, which has alarmed many Lib Dems who warned during the election of a Tory VAT “bombshell”.

To shouts of “shame” from the Labour benches, the 2.5% increase in VAT from January was backed by 346 to 270, majority 76. Russell, MP for Colchester, and Hancock, MP for Porstmouth South, had earlier supported a backbench Lib Dem motion demanding a Treasury investigation into the impact on the

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Opinion: Making VAT fair

It has become fashionable in the last few days to describe VAT as a “regressive”, and by implication unfair, tax. This is usually followed by complaint about how hypocritical it is of the Liberal Democrats to agree to an increase in its rate.

But VAT is not, by the simplest definition, a regressive tax. A regressive tax is one where the rate of taxation decreases as the value of the thing being taxed increases. A progressive tax is the other way round. Income tax is progressive, because those on higher incomes pay a higher rate of tax on it. Council tax …

Posted in Op-eds | Also tagged | 55 Comments

LibLink: Nick Clegg and Danny Alexander on the Budget

Writing in The Observer Danny Alexander says,

Labour’s approach of denial and complacency would bring higher interest rates, fewer jobs, less growth, more debt. It exposes us to much greater risks of financial irresponsibility – being forced by others to cut harder, with less care and control. That is the position of some European countries – it must never be Britain’s. There is nothing progressive about the consequences of denial and delay.

The coalition has chosen responsibility. We are restoring order to the nation’s finances, credibility to our position internationally, and confidence in our economy that is essential for growth. Having chosen

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Tory VAT tax rises and Michael Caine … the spoof posters collection

On the day that the Lib Dems tried to smoke out the Tories’ true position on whether they’ll jack-up VAT by 3% – annual cost to the average household, £389 – to pay for their unfunded tax-cuts, David Cameron was joined by a man worth £45m who rather likes the Tories’ promise to cut taxes for the wealthiest at the expense of everyone else.

Full marks to Lib Dem HQ who were smartly on the case to splice the two stories memorably together:

Lib Dem blogger Mark Thompson had his own pithy take on it:

Posted in General Election and Humour | Also tagged , and | 7 Comments

Nick Clegg reveals Tories’ £13bn VAT bombshell

For the past week, the Tories have been decrying Labour’s plans to raise National Insurance, pledging to reverse the rise but with a startling lack of clarity about how they will pay for it – beyond vague talk of ‘efficiency savings’, the kind of fantasy finance David Cameron and George Osborne would be quick to scorn if other parties tried it on.

Today Nick Clegg is showing that NI cuts may be popular with business – but they have to be paid for by someone, and the most likely people to pay the price of the Tories’ cuts will be …

Posted in General Election | Also tagged , , and | 21 Comments

Opinion: Once again, the French show a little bit more imagination…

The reduction in VAT from 17.5% to 15% quickly condemned and rightly so, by Vince Cable, as expensive and ineffective is one of this government’s more costly errors. The one year only cut will cost us the incredible sum of £12.5 billion pounds and has done little to stimulate consumer spending, simply because despite the enormous cost it still seems so meaningless at the till.

Indeed, it may will come with a sting in the tail, as when it comes to an end and VAT goes back to 17.5% it will come with a sharp inflationary jolt which may well trim back some of those ‘green shoots’ that Labour will being telling us about this winter.

The French, as usual, have shown a little bit more imagination.

Posted in Op-eds | Also tagged , and | 4 Comments

Jeremy Browne: VAT cut has helped the richest the most

The Lib Dem press release headline is stark: Wasteful VAT cut only benefiting the rich. (It’s also, whisper it gently, not 100% accurate: for ‘only’ read ‘mostly (ish)’).

Here’s what Lib Dem shadow chief financial secretary Jeremy Browne has to say about the party’s research showing that the VAT ‘savings work out at an average of over £9 a week for the richest households, while poorer households are saving less than £3, despite recent claims from Gordon Brown that families would save at least £5 a week’:

The Government’s defence of its wasteful VAT cut continues to unravel. Its benefits

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