Supporting the Hospitality and Tourism Sectors
In July 2020, Chancellor Rishi Sunak announced a temporary reduction in the rate of Value Added Tax (VAT) from the standard rate of 20% to a reduced rate of 5% on supplies of food and non-alcoholic drinks from restaurants, pubs, bars, and cafes, as well as hot takeaway food, accommodation in hotels, and entry fees to key attractions across the UK. This targeted fiscal intervention was aimed at boosting consumer demand, reducing costs for struggling businesses, and protecting millions of jobs in sectors heavily impacted by pandemic lockdowns.
The price of a family hotel stay is £800 without VAT. Use Extract D to calculate the decrease in the amount of VAT that would have to be paid on this hotel stay as a result of the temporary tax cut introduced by Rishi Sunak.
245 exam-style questions on AQA A Level Economics 2.5 Fiscal policy and supply-side policies, covering 2.5.1 Fiscal policy and 2.5.2 Supply-side policies. Each one has a worked solution and a mark scheme showing where the marks go.