Tax on tourism and flights in Northern Ireland could be slashed once the UK leaves the EU, an influential committee of MPs has claimed.
The hospitality industry pays VAT at a rate more than twice that of competitors in the Republic of Ireland.
EU law prevents member states from setting different levels of the charge for different regions. That power will be repatriated to the UK after Brexit.
Northern Ireland Affairs Committee chairman Laurence Robertson said: “Levels of VAT and Air Passenger Duty (APD) are making businesses less competitive than their equivalents in the Republic of Ireland.
“We are calling on the UK Government to examine options for reducing these tax burdens on tourism and creating the right environment for the sector to flourish.”
Tourism-related businesses in Northern Ireland pay 20% VAT, compared with 9% by their counterparts in the Republic. Northern Ireland is the only part of the UK sharing a land border with another state.
The tax difference creates a competitive disadvantage where businesses in Northern Ireland are forced to reduce prices, hampering their ability to invest or risking losing out on business by being too expensive, the committee said.
Last year, 2.5 million visitors fuelled an industry worth £0.8 billion and directly employing 43,000 people.
New attractions like the Titanic Belfast visitor centre and Game Of Thrones tours helped establish tourism as a pillar of the economy.
The committee warned: “However, long-term growth may be at risk.”
It added: “The tourism industry in Great Britain does not face the same form of competition and the Government must now consider if a one-size-fits-all policy is any longer appropriate.”
Similar concerns exist over the impact of APD on the competitiveness of airports.
Here, passengers pay the £13 short haul levy while in the Republic it has been abolished.
The committee said: “There is compelling evidence that Northern Ireland’s tourism industry is missing out on significant levels of business because the region’s airports find it increasingly difficult to obtain crucial new routes.