● Only four countries in study have cut taxes to aid tourist economies
● Extension to tax cuts “will almost certainly be needed” as COVID restrictions continue
Low taxes in the US will help its tourist economy bounce back when travel bans finally end shows a new study by UHY, the international accountancy network. The study shows a tourist in the US pays an average of 9.7% in tax on a typical daily spend compared to a global average of 13.7%.
UHY says that despite low tax levels on the tourism industry, US states could do more to support the industry by cutting tourism taxes like other countries such as the UK has recently done.
UHY’s study shows that a tourist in the US pays $24.74 in tax on a typical daily spend worth $255, compared with global average of $34.82.
The US’s low taxes on tourism ranked it 19th in UHY’s study covering 25 countries. UHY measured the tax paid on a number of everyday purchases by tourists – one night in a four-star hotel in a major tourist city ($150), a meal for two in a restaurant ($75) and a bottle of wine ($30).
The US charges significantly lower taxes on tourist spending than economies in the region, such as Canada (16.4%) and Mexico (18.9%).
Tourism taxes vary from state to state, with some states such as New York, which is the most visited state in the country, levying a combined sales tax of 8.52% on goods and services. Other states, which may not be as popular with tourists such as Oregon, has no sales taxes, in an effort to stay competitive and attract visitors.
While tourism represents a relatively small part of the overall US economy, in many states it is a significant segment of the economy and supports many jobs. However, the travel restrictions imposed as a result of the pandemic are having a significant impact on the industry, with travel bookings at third of what they were this time last year*. As a result, the US economy could lose around $155bn**.
However, UHY’s study found that while the UK, Ireland Germany and China have been quick to make significant tax cuts to aid the tourism industry, 21 of 25 countries in the study, including the US have not yet made any cuts. The firm says that governments could consider further tax cuts to help their tourism economies.
UHY says that there is significant scope for central and local governments around the world to stimulate demand for tourist businesses by cutting taxes on consumption, alcohol duties and local taxes in tourist cities.
Even in the countries that have cut taxes on tourism, extensions will almost certainly be needed until the sector begins to recover. The UK’s 5% VAT rate for the leisure and hospitality sector is set to expire and return to 20% at the end of March 2021, while China’s zero VAT rate ends on December 31 2020. Germany has already announced that its temporary 7% VAT rate will not return to its usual 19% until July 2021. Ireland has temporarily cut its VAT rate for hospitality and tourism businesses from 13.5% to 9% until December 2021.
The tourist industry has been among those worst-hit by COVID, with restrictions on travel set to continue for at least several more months. The International Civil Aviation Authority reported in May that the pandemic is likely to have reduced air passenger numbers by 1 billion by the end of September 2020. This has caused substantial knock-on effects for sectors including hotels, restaurants and visitor attractions.
Dennis Petri, Partner at UHY LLP and Managing Director at UHY Advisors says: “Overall, the low tourist taxes for the US as a whole give it more of a helping hand compared to many other countries. However, we may soon need to do more to help the industry through one of the most difficult periods it has ever faced.”
“The US is already extremely popular among travelers and is home to some of the worlds most visited destinations. Tax cuts could be a way to not only attract tourists back when international travel restrictions are lifted but also stimulate domestic travel in the interim. With a vaccine finally on the horizon, we need to start planning for the post-coronavirus recovery.”
“It’ll be up to states with significant tourism industries such as California and New York to make a concerted effort to drum up travel through more attractive tax rates in order to boost the sector for the US as a whole.”
“This is a state issue – local and regional governments could also do more to help. Some cities levy specific taxes on hotel rooms and suspending those charges for a period would lift a little more of the burden from tourists and the hospitality industry.”
UHY says that Europe (11.3%) has lower taxes than the global average on tourism. Some European countries that rely relatively heavily on their tourism industries have among the lowest tourist taxes in UHY’s study, including Spain (10%) and France (11.6%).
*LSE October 2020
**World Travel & Tourism Council
Tourism taxes in the US make up 9.7% of a tourist’s typical daily spend
ENDS
About UHY LLP
UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc. and its subsidiary entities. UHY Advisors, Inc. provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of “UHY Advisors.” UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms. UHY LLP and UHY Advisors, Inc. are US members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. “UHY” is the brand name for the UHY international network. Any services described herein are provided by UHY LLP and/or UHY Advisors (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.
About UHY, the network
Established in 1986 and based in London, UK, UHY is a leading network of independent audit, accounting, tax and consulting firms with offices in over 320 major business centres across more than 95 countries. Our staff members, over 8,100 strong, are proud to be part of the 16th largest international accounting and consultancy network. Each member of UHY is a legally separate and independent firm. For further information on UHY please go to www.uhy.com.
UHY press contact: Leigh Lyons on +44 20 7767 2624 Email: l.lyons@uhy.com – www.uhy.com
Nick Mattison or Richard Crossan
Mattison Public Relations
+44 20 7645 3631
+44 74 4637 5555
Email: richard.crossan@mattison.co.uk
UHY is a member of the Forum of Firms, an association of international networks of accounting firms. For additional information on the Forum of Firms, visit www.forumoffirms.org.
UHY is an international association of independent accounting and consultancy firms, whose organizing body is Urbach Hacker Young International Limited, a UK company. Each member of UHY is a separate and independent firm. Services to clients are provided by the UHY member firms and not by Urbach Hacker Young International Limited. Neither Urbach Hacker Young International Limited nor any member of UHY has any liability for services provided by other members.
