VAT on domestic tourism should be cut to 5% as part of a “bold” plan to rescue the industry following the coronavirus crisis, the Scottish Liberal Democrats have said.
Orkney and Shetland MP Alistair Carmichael said the tax should be reduced from its current rate of 20%.
Many tourism businesses in Scotland will be able to reopen from July 15 as the lockdown eases.
Mr Carmichael said the potential for job losses remained “severe” in the aftermath of the crisis.
He called on the Chancellor to cut VAT as part of a comprehensive plan to support the tourism sector.
He said: “In the Northern Isles and across Scotland, local hotels, B&Bs and tourist attractions play a vital role in our communities.
“The seasonal nature of tourism means that many businesses will not have the income to avoid closing down after the support packages end.
“With most of the summer already gone and many people still anxious about travel, these businesses face the prospect of ‘three winters in a row’.
“Furloughed workers have some security now but the potential for job losses in the immediate aftermath of the crisis is severe.”
He continued: “Scottish Liberal Democrats believe that our vital tourism businesses deserve a bold VAT cut – as a sensible investment to ensure future success.
“The Chancellor should make this reduction as part of a comprehensive package of measures to tackle the growing economic crisis.
“At the moment people in the UK are being taxed harder than almost anyone else in Europe for simply supporting local tourism. This simply doesn’t make sense.
“Alongside a targeted extension of the coronavirus job retention scheme specifically for those unable to reopen, this VAT cut would give tourism and hospitality a crucial boost.”
A spokesman for the Treasury said: “We have provided a generous and wide-ranging package of support for businesses and jobs, including our job retention scheme, bounce-back loans, VAT deferrals and protection against eviction.
“As we focus on reopening the economy, we’re keeping our support package under constant review and we will set out any further measures before the summer recess.”