An independent report launched this week shows that more than 2,000 jobs would be created in Northern Ireland’s hospitality sector if the VAT rate was cut from 20 percent to 5 percent on accommodation and visitor attractions.
The launch of the report was attended by prominent NI politicians including Nigel Dodds MP, who addressed an enthused audience at the Europa Hotel in Belfast.
The report shows how a VAT cut rate would boost NI’s hospitality and tourism industry, which operates in a competitive global market and faces competition from the Republic, where a VAT rate of 9 percent applies on tourism accommodation, food and visitor attractions.
The study, carried out by Nevin Associates, is the first to look at Northern Ireland statistics separately from the rest of the UK.
H&C News spoke with Food NI Chief Executive Michele Shirlow MBE to gauge her reaction, Michele told us:
“The Tourism Industry in Northern Ireland has demonstrated its creativity and innovation in recent years especially via Year of Food and Drink 2016. FoodNI support this call for a reduction in tourism VAT.”
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 has a 9 percent tourism VAT rate, 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.
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 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.
“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”
“It should be noted that the food and drink component of our hospitality sector is responsible for around 70 percent of our GVA annually.
“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 percent.’’
Commenting on the report’s findings, 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.”
Coming in the same week as the news relating to thousands of potential job losses in Northern Ireland from the Bombardier Boeing tariff debacle, reducing the Tourism VAT rate would seem an option to provide some good news.