Motion calls for VAT rate drop

The thorny issue of the difference in VAT rates between Northern Ireland and the Republic is under the spotlight again as a motion is tabled at Westminster calling for recognition of the difficulties faced by pubs and restaurants here because of the inequality.

As most readers will know, VAT is charged at 20 per cent in Northern Ireland – the third highest rate in Europe – while hospitality businesses in the south pay just nine per cent.

Pressure for new, more equitable arrangements has been growing from within the trade for some years and now, following the motion from the SDLP’s Margaret Ritchie, the issue is very much back on the agenda for discussion.

Recent research undertaken by the Northern Ireland Hotels Federation in collaboration with consultancy firm, ASM Belfast has suggested that if VAT were reduced in Northern Ireland, jobs in the sector could grow by up to 40 per cent by 2020.

The Federation – which supports a UK-wide reduction in VAT for the tourism trade – insists that the move would allow the industry to be more competitive, to invest in its people and its properties and contribute to an increase in GDP

Janice Gault, chief executive of the Federation, told LCN recently that she believed the continued high rate of VAT in Northern Ireland was costing the country hundreds of millions in lost earnings.

“The issue for Northern Ireland is exacerbated by the promotion of Ireland as a one-island destination in overseas markets,” she added. “The rate of VAT in the Republic of Ireland is nine per cent, some 11 per cent lower, and this invisible tax is not seen by tourists.”

There are now 139 hotels in Northern Ireland offering around 8000 bedrooms.

Figures have been quoted which show that since 2011 in the Republic, reduced VAT has produced 6,500 new jobs and helped retain 31,000 more.

Pressure for change is also intense from within the licensed sector. Colin Neill of trade body, Pubs of Ulster, has voiced his concerns about the inequality in VAT rates many times.

“”The Republic of Ireland currently has a competitive advantage over Northern Ireland and has succeeded in attracting more foreign visitors and increasing domestic tourism, as well as creating over 6,000 additional jobs in the process,” he said recently.

He called on the chancellor to make a sector-specific reduction in the VAT rate, which he said would boost tourism across the island and allow pubs in the north to compete on an equal footing.