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News Article

Could tax cuts create hospitality jobs in Northern Ireland?

Report claims tourism VAT cut could create 2,000 jobs

More than 2,000 jobs could be created if the VAT rate on hotels and visitor attractions in Northern Ireland was cut to 5%, claims a report commissioned by the Cut Tourism VAT campaign group. The study by Tourism Respect & Nevin Associates looks at the possible effects of a cut from the current VAT rate of 20%, the standard rate paid by other UK industries.

Tourism is one of a limited number of goods and services for which the EU permits member states to apply a reduced VAT rate. Out of 36 European countries, only the UK, Slovakia and Denmark do not apply a reduced rate for selected tourism services. The Cut Tourism VAT Campaign is calling for VAT on visitor accommodation and attractions to be applied at the UK’s single existing reduced VAT rate of 5%, which already applies to limited parts of the UK tourism sector, such as cable cars in theme parks and static caravans. Hospitality businesses pay VAT at a rate of 20% - more than twice that of competitors in the Republic of Ireland, where the current rate is 9%.

EU law prevents member states from setting different levels of the charge for different regions, which means that at present the rate cannot be different in Northern Ireland from the rest of the UK. The power to set tax rates will be repatriated to the UK after Brexit and the Northern Ireland political party, the DUP, is pressing for a speedy cut.

The study is the first to look at Northern Ireland statistics separately from the rest of the UK. It claims that although a cut in the VAT rate for visitor accommodation and attractions would reduce Treasury income by £4.2 million in the first year; over a five-year period the Exchequer would gain by £32 million, rising to £109 million over a decade. Northern Ireland is the only part of the UK sharing a land border with another state, and the campaign by the hospitality industry claims that the differential in tax rates puts Northern Ireland at a particular disadvantage.

The study also shows that in the Republic of Ireland, average spend per visit is £350, almost double the £186 average spend in NI. Almost 80 percent of the Republic of Ireland’s visitors come from overseas, whereas the great majority of NI’s visitors are from other parts of the UK.

Commenting on the report’s findings, Colin Neill, Chief Executive of Hospitality Ulster, said:

“Whilst existing research shows a cut in Tourism VAT across accommodation, food and visitor attractions would create more than 200,000 jobs across the UK, this report is the first one that has looked in depth at the impact of a VAT cut on accommodation and visitor attractions in Northern Ireland.

“It demonstrates the significant benefits that come from a VAT cut and shows a very short period before the treasury benefits. At this point we can only extrapolate from previous UK wide research what the benefits of a cut to VAT on food would be, but even modest estimates would see an additional 4,000 jobs added.

Vernon Hunte, Campaign Manager for the Campaign to Cut Tourism VAT, said:

“This economic model shows that reducing VAT on accommodation and attractions delivers £109 million to Treasury over a decade. There are clear benefits of doing so in Northern Ireland – for the industry, the wider economy and the public finances, and this will be a key piece of evidence as the Treasury take forward their own review. The Campaign and our supporters will continue to campaign to ensure the opportunity is taken to allow our industry to compete on a fair playing field with the 33 other European countries who already enjoy reduced Tourism VAT.”

For an Executive Summary of the report, follow this link. See also this document showing a submission by the British Hospitality Association to a parliamentary inquiry on tourism tax rates in Northern Ireland. In May, we carried details of a report looking at hospitality taxes across Europe.

Article details

  • Author(s)
  • David Simpson
  • Date
  • 02 October 2017
  • Subject(s)
  • Hospitality Sector