Probe launched into whether VAT rate is damaging our £750m tourist trade
A parliamentary inquiry has been launched into whether the VAT rate in Northern Ireland puts tourism at a disadvantage.
The industry is worth more than £750m to the local economy and is responsible for 43,000 jobs.
The Northern Ireland Affairs Committee of MPs is to consider how the Government can better support a sector facing stiff competition from the Republic where a lower rate of VAT is imposed.
Chairman Laurence Robertson said: "The tourism and hospitality industry has a vital role to play in growing the Northern Irish economy and we are keen to find out how, through the tax system, HM Government can better support hotels, restaurants and other businesses to attract visitors.
"In particular, we want to explore whether the UK's 20% VAT rate is putting businesses at a competitive disadvantage, especially when compared with their counterparts across the border."
The inquiry will consider what effect a reduced rate of UK VAT would have on the tourism and hospitality sector in Northern Ireland and to what extent that would encourage tourists to visit.
It will investigate 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 has across the border. Parliamentarians will consider what services should benefit from a reduced rate and which should be excluded.
Other key questions include whether a reduction will lead to a loss of tax revenue and, if so, how this should be paid for and hat other tax changes could the Government implement to support the tourism and hospitality industry in Northern Ireland, including the hosting of major international sporting events?
Colin Neill, chief executive of Hospitality Ulster, said: "The UK's VAT rate places Northern Ireland's tourism and hospitality sector at a disadvantage as we share a land border with the Republic which has a VAT rate of 9%.
"On a wider European scale, all but four member states have introduced reduced VAT rates for visitor accommodation and 13 members states have introduced a lower VAT rate for restaurants. Hospitality Ulster has been at the forefront of coordinating this message from the sector, but we now need an additional effort from our elected representatives to make this happen. The hospitality sector generates £1.1bn for the economy and employs 45,000 in food and drink service alone, so removing this barrier will have a significant impact."
He said a lower VAT rate would provide the sector with greater confidence in securing jobs and creating more jobs.
"This is a solid first step in addressing the problem," he said.