Lower tourism VAT rate could create 2,000 jobs in NI says new report
MORE than 2,000 jobs could be created if the VAT rate on hotels and visitor attractions in Northern Ireland is cut to 5 per cent, a new report has claimed.
Hospitality businesses pay VAT at a rate of 20 per cent - more than twice that of competitors in the Republic of Ireland and the latest independent report from Nevin Associates suggests a lowering of the rate would provide a significant boost to local business.
EU law prevents member states from setting different levels of the charge for different regions. That power will be repatriated to the UK after Brexit and the DUP is pressing for a speedy cut.
Howard Hastings, managing director of Hastings Hotels, said currency fluctuations between sterling and the euro are not grounds for long-term business decisions.
"VAT is structural and would kick-start our tourism economy and these numbers understate the potential for delivery of more accommodation into Northern Ireland and the delivery of upstream benefits."
The study, is the first to look at Northern Ireland statistics separately from the rest of the UK.
A cut in the VAT rate for visitor accommodation and attractions would reduce Treasury income by £4.2 million in the first year; however, over a five-year period the Exchequer would gain by £32 million, rising to £109 million over a decade, it said.
Tourism-related businesses in Northern Ireland pay 20 per cent VAT, compared with 9 per cent by their counterparts in the Republic.
Ciaran O'Neill, president of the Northern Ireland Hotels Federation, who runs Derry's Bishops Gate Hotel, said room rates at hotels in Donegal had risen faster than in his city.
"Because hotels in Donegal have a better margin they are able to price in a way that we cannot compete with."
The study also shows that in the Republic average spend per visit (£350) is almost double that of Northern Ireland.
The report forecasts that the cut would be worth £332 million to the balance of payments over a decade.
Colin Neill, chief executive of Hospitality Ulster, said it was about being competitive.
"At the minute we are uncompetitive in the European market.
''It is time our ridiculously high VAT rate was reduced in line with many other countries, including the Republic of Ireland. Indeed 17 of the 19 EU countries have tourist VAT rates below 10 per cent.''
Nigel Dodds, the DUP's senior MP at Westminster, said: "A cut in VAT in the tourism sector would boost that sector enormously - it would attract more visitors, create more jobs and be a massive boost to the economy in the long run.
"This is a win-win; a win for the Treasury and a win for Northern Ireland and win for people's employment prospects."