British hotels, attractions and restaurants claim a cut in VAT would bring back visitors but admit they may spend savings elsewhere rather than reduce prices.
A survey of over 200 British Hospitality Association (BHA) members found that nearly 98% thought the current VAT rate of 20% hindered the competitiveness of domestic tourism.
Three-quarters believe a reduction to five per cent will lead to more domestic visitors while 55% say it would lead to more overseas visitors.
But while more than 95% would pass on all or some of the cut in VAT, if achieved, others would spend the money elsewhere.
82% would invest more in their product/facilities, 67% would employ more people, 57% will invest more in training and just under half would increase staff wages.
Ufi Ibrahim, BHA’s chief executive, said: "It’s clear that our members plan to plough the saving achieved back into their business through lower prices, greater investment, more training and higher wages.
"These findings emphasise our belief that a reduction in VAT will boost customer demand. This will lead to the creation of more and more jobs – our research indicates that 78,000 jobs will be created following a reduction of VAT to five per cent. Of course, this will lead to greater revenues to the Treasury through higher tax returns.
"Reducing the VAT rate will also improve the UK’s international competitiveness. This country is only one of four out of the 27 EU member states which does not impose a lower rate of VAT on hospitality services."
The BHA has merged with the Bourne Leisure Group and Merlin Entertainments Group to campaign for a reduced rate of VAT.
