Belfast Telegraph

Brexit 'could open the door to lower VAT for Northern Ireland's hospitality trade'

Hotels such as The Gresham in Dublin will see VAT rise to 13.5%
Hotels such as The Gresham in Dublin will see VAT rise to 13.5%
Annoucement: Paschal Donohoe
Ryan McAleer

By Ryan McAleer

Brexit could open the door to a lower VAT rate for Northern Ireland's hospitality industry, the head of the Hotels Federation here has claimed.

Irish Finance Minister Paschal Donohoe announced as part of the Republic's Budget that it will increase the VAT for bars and hotels from 9% to 13.5% in January.

Although the 9% rate for hospitality was introduced in 2011, adjustments date back to 1986 when the rate for hotels was cut from 18% to 10% and on restaurant meals from 23% to 10%.

The reductions have led to arguments from the hospitality industry on this side of the border that VAT for the sector should be reduced from 20% to prevent a loss of trade to the Republic.

Northern Ireland Hotels Federation boss Janice Gault said that while EU rules around taxation currently prevent the UK from altering VAT in one region, things could change following Brexit.

"Brexit affords an opportunity to alter this, which we hope Government will act upon," Ms Gault said.

"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 30 years.

"This approach has provided a solid operating base for an industry, which contributes in the region of €9bn to the Republic of Ireland's economy." 

Colin Neill of Hospitality Ulster said the new 6.5% differential still represented "a huge gap", reinforcing the need to cut tourism VAT here.

"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%," he added.

"This would create a sustained positive impression on the economy."

DUP MP Sammy Wilson claimed the difference in VAT represented "a live and real problem, which is crippling trade".

"How can the sector here be expected to compete when the UK Government continues to tie the hands of the sector behind its back on this issue as the Republic pushes on?" Mr Wilson said.

Mr Donohoe said that the new 13.5% rate would raise €466m in extra taxes.

Some €587m of investment was also announced for the ports of Dublin, Cork and Shannon Foynes.

Brian McGrath of Foyle Port said while he was encouraged for the the industry, it "put into sharp focus the need for investment in ports in Northern Ireland to match the proposed development of our southern counterparts".

Yesterday's announcement by the Finance Minister also confirmed that the Republic will retain its 12.5% corporation tax rate.

Belfast Telegraph