Tourism VAT rate cut would boost jobs, says study
A new study by the economic consultancy, Nevin Associates, has suggested that if the tourism VAT rate in Northern Ireland were to be reduced to five per cent – thus undercutting the RoI’s favourable nine per cent rate – more than 2000 extra hospitality jobs would be created north of the border.
The trade in the north – where VAT currently runs at 20 per cent – has spent years highlighting the dire economic impact of the lack of parity, although there seems little evidence that the UK Treasury will act to alleviate those difficulties any time soon.
According to Nevin Associates, if the Treasury were to agree to the suggested cut, it would initially be hit by a £4.2m reduction in revenue from NI. Within a five-year period, however, Nevin estimates that the government could be benefiting from up to £32m in tourism tax. That could run to as much as £109m over a 10-year period.
It will come as no surprise to operators north of the border that tourists are spending more, on average, in the RoI. In fact, Nevin puts visitor spend in the Republic at almost double that in NI – £350 against £186.
This latest study comes in the same month that an economic impact report, undertaken by economist Jim Power for the Restaurants Association of Ireland (RAI), claims that even a one per cent cut in the Republic’s nine per cent tourism VAT rate could result in job losses to the industry of up to four per cent – that would equate to around 6000 hospitality jobs.
The Republic’s Finance Minister, Paschal Donohoe, is due to announce the region’s Budget 2018 measures on October 10 and as always, some change to the RoI’s favourable nine per cent tourism VAT rate could be in the pipeline.
Addressing the issue recently, however, Taoiseach Leo Varadkar urged caution. Speaking on RTE, he said that while the special rate was not needed to the same extent as it had been when it was introduced, there did need to be consideration given to the possibility that withdrawing it now could damage the industry in light of Brexit.
The RAI said recently that any consideration of a one per cent reduction in the tourism VAT rate in the Republic needed to be taken in light of its likely impact on competitiveness across the sector.
“I am appealing to the government to think twice before loading another one per cent VAT on consumers, “said Adrian Cummins, chief executive of the RAI. “This will cause enormous damage to the economy of border counties and rural Ireland.”
