Lobby group backs calls for VAT overhaul

The Isle of Man's standard VAT rate is at 20% in line with the UK

A business lobby group has backed a cafe owner's call for an overhaul of Manx VAT rates for hospitality firms.

Earlier this week, the owner of the Victory Cafe Vicky Cottier said that hospitality businesses could not compete with other employers to offer staff salaries they "truly deserve" as profit margins were "horribly squeezed".

The chamber said it "stands firmly behind" the industry's call for a "VAT overhaul", as the current standard 20% rate placed a "significant strain" on the sector, reducing competitiveness and growth.

The government has been contacted for a response.

The island's standard rate mirrors that in the UK, and national VAT data is used to calculate the share of indirect tax revenues the island receives from the UK under the Final Expenditure Revenue Sharing Arrangement.

'Sustainability and vitality'

The rate was reduced to 5% on food and leisure attractions in both jurisdictions in July 2020 to support the industry in the wake of the coronavirus pandemic, but rose to 12.5% in October 2021 before reverting back to 20% in April the following year.

In a statement the chamber said hospitality firms were the "cornerstone of our island’s economy and community", and a reduction was "crucial" for the "sustainability and vitality of these businesses".

The lobby group said it encouraged "constructive dialogue" between members, individual businesses and trade associations and the government.

The chamber would "continue to highlight the importance of this issue until tangible changes are implemented", it added.