Northern Ireland tourism and hospitality sectors will continue to lose out to their rivals across the border despite a VAT increase in the Irish Budget local leaders have claimed.
After seven years on a VAT rate of 9%, the tax on accommodation and out of home meals was raised to 13.5% in Tuesday’s budget by Finance Minister Paschal Donohoe.
However, the widely predicted move still leaves the hotel and hospitality industry at a huge disadvantage according to leaders as it continues to face a 20% rate.
That disadvantage will continue to be acutely felt right across Northern Ireland, acting as a brake on the growth of the hospitality and tourism sector, said Hospitality Ulster CEO Colin Neill.
“The new incoming 13.5% rate in the Republic means that there will be a 6.5% difference which is a huge gap and highly detrimental to a sector which supports more than 60,000 jobs across Northern Ireland,” he said.
“The latest independent research shows that more than 12,000 jobs would be created across accommodation, visitor attractions and food if the VAT rate was cut to 5%. This would create a sustained positive impression on the economy.”
Janice Gault, CEO of the NI Hotels Federation (NIHF), said it was import to realise that, while the 9% rate was introduced in 2011 to boost the industry in the wake of the financial crisis, it had enjoyed lower rates for some time before that.
“Many people, particularly policy makers in the UK, seem to forget or do not acknowledge that the Republic of Ireland has had a reduced VAT rate for its tourism sector since 1986.
“Whilst the 9% rate was the lowest level to date, the industry south of the border has benefited from a reduced VAT rate for over thirty years.”
That, she said, had provided a solid operating base for an industry contributing around €9 billion to the Irish economy.
“Indeed, many attribute the fact that the industry has experienced record growth since 2011 and created over 38,000 jobs to its reduced VAT rate, a considerable feat given the fiscal climate of a decade ago,” said Ms Gault.
“Undoubtedly the news will be seen as a negative for the campaign to reduce VAT for accommodation and food in Northern Ireland. However, the Republic of Ireland experience does show how such a policy can act as a catalyst for growth and create considerable fiscal benefit in the long run.”