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‘Bed’ Tax Could Seriously Affect Entertainment Sector Say PLASA
The Professional Lighting and Sound Association (PLASA) has lent its name to a lobbying campaign intended to encourage the government to rethink its proposals to introduce a 10% tax on all UK hotel bills. The proposal - part of a wider Government tax review conducted by the Lyons Inquiry - recommends that a 10% tax per night is added to the current 17.5% VAT - which means that the UK would effectively become the highest taxed destination in Europe.
PLASA believes that the proposed tourist tax (dubbed the ‘bed’ tax) will hit this industry from both sides: not only will it put yet another financial burden on businesses in the entertainment, event and installation sectors where business-related travel accounts for a large part of their ongoing overheads, but it will almost certainly affect tourism revenues, which directly influence the financial performance of this industry.
The rationale behind the proposed new tax is that it is considered unfair that local taxpayers should subsidise the services received by tourists. However, there is wide concern that a price increase would affect the competitiveness of the UK tourism industry - and ultimately tourist numbers. Tourism is worth almost £74 billion a year to the UK (of which over £13 billion comes from international visitors) and employs 7% of Britain’s workforce. The Department for Culture, Media and Sport has set a target to increase the value of tourism to £100 billion by 2010, recognising this as the key to further wealth and job creation for the economy. Pundits have suggested that the Olympic Games alone could well provide a £2billion boost to the UK economy. Since there is a clear link between tourism numbers and investment in the attractions, live event, retail, leisure and performing arts sectors, the proposed tax will potentially decelerate growth in these areas.
There are other elements of the review that could also prove detrimental to companies: as part of its remit, the Inquiry is reassessing business rates and looking at whether local authorities should have a role in setting them. It is also considering research commissioned by the Association of London Government on the options for levying taxes on restaurants, entertainment venues and sporting events. Although, these two elements are still very much at the fact-finding stage, if implemented, they could place additional financial burdens on companies already dealing with spiralling costs.
The Consultation period officially closed on 13th March, but there is an extension in place and opinion will continue to be solicited from key stakeholders in the months to come.
20th March 2006
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