An independent report launched yesterday (25 September) shows that more than 2,000 jobs would be created in Northern Ireland's hospitality sector if the VAT rate was cut from 20% to 5% on accommodation and visitor attractions.
Additionally, existing UK-wide research shows that thousands more jobs would be created if VAT on food was also cut to 5%.
The study, carried out by Nevin Associates, 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 result in a loss of treasury income of £4.2 million in the first year, however over a five year period the treasury would gain by £32 million and by £109 million over a ten year period.
The study also shows that in the Republic of Ireland, which operates a tourism VAT rate of 9%, average spend per visit is £350, nearly double the £186 average spend in NI. Almost 80% of the Republic’s visitors come from overseas, whereas the great majority of NI’s visitors are from other parts of the UK.
The report forecasts that the cumulative improvement to Northern Ireland’s balance of payments with a VAT rate cut over ten years would be £332 million.
Commenting on the report’s findings, Colin Neil, chief executive of Hospitality Ulster, said, "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 wold see an additional 4,000 jobs added.
"This is why the research by the UK treasury, promised as part of the Conservative / DUP Confidence and Supply agreement, is so important, and why we must ensure the treasury don’t create a research model that is designed to reinforce their existing stand against a cut."
Vernon Hunte, campaign manager at the British Hospitality Association, added, "This economic model shows that reducing VAT on accommodation and attractions delivers £109 million to the 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."