Cutting the tourism VAT rate in Northern Ireland could enable the sector to generate an extra £25 million a year, a hospitality body has claimed.
Hospitality Ulster said the reduction could also help create an extra 2,200 tourism related jobs per annum.
The organisation’s chief executive Colin Neill will outline the bold predictions to a Westminster committee on Wednesday.
The Northern Ireland Affairs Committee is conducting an inquiry into how the Government can support a sector facing stiff competition from the Republic of Ireland, where a lower rate of VAT is imposed.
MPs are exploring whether the UK’s 20% VAT rate is putting businesses at a competitive disadvantage.
The probe is examining the impact in other countries that have implemented a reduced rate in their tourism and hospitality sectors and what effect the Republic’s 9% VAT rate on tourism had.
Ahead of his scheduled appearance before committee members at Westminster, Mr Neill said:
“Currently 25 of 27 EU countries have reduced tourism VAT. The UK’s current rate of 20% is almost twice the European average which undermines competitiveness against countries with lower rates of VAT.
“The UK is ranked 140 out of 141 countries for price competitiveness in tourism. The price sensitive nature of the tourism industry means tourist businesses in the UK are losing out to our European counterparts due to the high level of VAT.
“Northern Ireland is the only part of the UK to have a land border with an EU member state - the Republic of Ireland - which has a tourism VAT rate of 9% on accommodation, food and visitor attractions. A situation further exacerbated as the Republic of Ireland is our largest market and closest competitor.
“There is no doubt the potential impact of a reduction in tourism VAT in Northern Ireland is significant. Based on the experience of the Republic of Ireland we can predict the growth a reduction in tourism VAT would have in Northern Ireland over a similar time frame of three to four years. The potential to increase current total visitor numbers to around five million, increase total revenue to over £850 million, and increase employment within tourism to over 50,000 is a real one.”