Reducing tourism taxes to 5 per cent in Northern Ireland, which would undercut the 9 per cent tourism VAT rate south of the Border, could deliver more than 2,000 additional jobs for the North, a new study suggests.
The UK’s tourism tax rate is currently 20 per cent, which the North’s hospitality sector has long complained places it at a distinct disadvantage to the Republic.
According to the new independent study on tourism tax rates, carried out by the economic research consultancy Nevin Associates, the UK treasury would initially take a £4.2 million hit from any tourism tax cut in the North. However, Nevin estimates that within a five-year period the UK treasury would then potentially benefit by an additional £32 million from tourism taxes if the rate in the North were cut to just 5 per cent and potentially by £109 million over a decade.
The Nevin report highlights that because of the 9 per cent tourism VAT rate in the Republic, visitors on average spend more there than they do in the North. It estimates that the average visitor spend is £350 in the South – almost double the £186 average spend in the North.
The report concludes “that the cumulative improvement to Northern Ireland’s balance of payments with a VAT rate cut over 10 years would be £332 million”.
Colin Neil, chief executive of industry body Hospitality Ulster, said the report illustrated the significant benefits of a VAT cut to the North’s economy in general. “It is time our ridiculously high VAT rate was reduced in line with many other countries, including the Republic of Ireland. ”
