In Brief: A recent study by Oxford Economics predicts a substantial economic impact from England’s proposed holiday tax, with a potential GDP loss of £2.2 billion.
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Oxford Economics Study Projects £2.2 Billion GDP Loss from Proposed Holiday Tax in England – Image Credit Unsplash
Economic analysis commissioned by UKHospitality projects that a proposed holiday tax in England would result in a £1.6 billion tax increase for holidaymakers, a £2.2 billion reduction in GDP, and a £688 million decrease in tax receipts to the Treasury if a 5% levy is fully realised by 2030.
Modelling by Oxford Economics, commissioned by UKHospitality, examined the potential effects of a proposed holiday tax in England under three scenarios: a 5% levy on accommodation, a £2 levy per person per night, and a £2 levy per room per night. All scenarios are projected to result in reductions in GDP, tourism spending, nights spent in accommodation, and total jobs.
Assuming the impact of a 5% levy is fully realised by 2030, the analysis projects a £2.2 billion reduction in GDP, a £1.6 billion tax increase for holidaymakers, and a £688 million decrease in tax receipts to the Treasury. The study also forecasts a loss of £101 million in direct investment from hospitality and tourism businesses, a £1.8 billion reduction in tourism spending, and 9 million fewer nights spent in accommodation.
UKHospitality has publicly opposed the proposed holiday tax and is calling on the Government to halt its implementation. The organisation is urging consumers and holidaymakers to oppose the tax.
The Oxford Economics study concludes that introducing a holiday tax would have a negative economic impact, with the additional revenue generated by the tax expected to be outweighed by reduced economic activity. The analysis notes that higher costs would dampen tourism demand, leading to a loss in GDP, and that England currently operates at the upper end of VAT rates, with an additional tax further weakening the country’s competitiveness relative to other destinations.
