Cutting the tourism VAT rate in Northern Ireland could see the sector generate an extra £25 million a year, lobby group Hospitality Ulster has claimed, adding thata cut could help create an extra 2,200 tourism related jobs a year.
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 per cent 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 nine per cent VAT rate on tourism had.
“Currently 25 of 27 EU countries have reduced tourism VAT,” said Mr Neill.
“The UK’s current rate 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.
“There is no doubt the potential impact of a reduction in tourism VAT is significant. Based on the experience of the Republic of Ireland we can predict the growth a reduction in tourism VAT would have here over a similar time frame of three to four years.
“The price sensitive nature of the tourism industry means tourist businesses in the UK are losing out to our European counterparts.”