Competition heats up as North plans to slash 'tourist tax'
Tourism insiders are warning proposals to reduce hotel and visitor attraction VAT rates in the North to 5pc mean it's vital our 9pc reduced VAT rate remains in place.
The DUP has thrown its weight behind the findings of a report on the tourist industry north of the Border, which suggested a cut to its 20pc VAT rate would create more than 2,000 jobs there.
Research by Nevin Associates, which for the first time looked specifically at tourism in the North, said in the first year there would be a reduction to the Exchequer of around €4.8m.
However, over the course of a decade it would result in an increase of almost €124m, thanks to increasing tourism.
EU law prevents member states from setting different VAT levels for different regions within the same territory.
That power will be repatriated to the UK after Brexit and the DUP, which is propping up the Conservative government, has been pressing for a speedy cut.
"A cut in the VAT in the tourism sector would boost that sector enormously - it would attract more visitors, create more jobs and be a massive boost to the economy in the long run," said DUP MP Nigel Dodds (inset).
He said the report made a "compelling case" for a VAT reduction to 5pc. Eoghan O'Mara Walsh, chief executive of the Irish Tourist Industry Confederation, said it highlighted the importance of keeping the 9pc rate here.
"I think we should keep a very close eye on it," he said of the plans to cut the hospitality VAT in the North.
While tourism is usually promoted on an all-island basis, it was important we retain our competitiveness south of the Border, he said.
"Anything that weakens our competitiveness needs to be avoided.
"A lot more could be done. Tourism is one of the few sectors that provides regional jobs, but we can't take that for granted," he added.
He said there was already evidence the number of British tourists coming here was down around 7pc and called for an increase in tourism funding of €20m in the Budget.
One issue is the weakening sterling making it more expensive for British tourists.
"Keeping our VAT rate at 9pc is critical," he said.
Adrian Cummins, chief executive of the Restaurants Association of Ireland, echoed those concerns and said if the VAT rate was to be cut to 5pc in the North, we should also consider cutting the rate.
"One thing the report does is point out how important VAT rates are for tourism and I welcome that," he told the Irish Independent.
"If we touch our reduced VAT rate it affects job creation. I think that a 5pc rate is the perfect rate for tourism and hospitality," he said.
"We should be looking for parity." Mr Cummins said there should be a united, all-Ireland effort to promote tourism.
"The uncertainty surrounding Brexit is in danger of affecting our tourism product," a statement from the Irish Hotels Federation said.
"We are calling on the Government to take the necessary steps to protect Irish tourism and to avoid any budgetary changes that would weaken our sector's ability to deal with the risks it currently faces from Brexit."
Retail Excellence yesterday said there was also an urgent need to reduce the normal 23pc VAT rate.
In its pre-Budget submission, the organisation, which represents retailers, called for an overall reduction in consumption taxes.
"Such moves are critical for the well-being of Irish retail and the Exchequer," it said.