Promoting the tourism industry in Northern Ireland through the tax system Contents

Summary

In recent years Northern Ireland’s tourism sector has expanded significantly, with external visitor numbers reaching almost 2.5 million in 2016. The industry contributes over £0.8 billion to the economy per year, and directly employs more than 43,000 people. Despite this performance, the sector represents a much smaller share of GDP than is the case for other parts of the UK. Notwithstanding the current political situation in Northern Ireland, this suggests there is potential for greater growth in the tourism industry.

However, Northern Ireland’s tourism industry is at a disadvantage because competitors in the Republic of Ireland benefit from significant tax and other advantages—in particular, a lower rate of tourism VAT and the fact that there is no equivalent to air passenger duty. This Report argues that these pressures on the sector in Northern Ireland should have a stronger bearing on policy formulation by the UK Government, particularly once the UK leaves the European Union.

The Report makes the case for the UK Government to implement regional variations in tourism VAT and introduce other tax changes to assist the sector. It highlights the substantial economic benefits to the Republic of Ireland’s tourism industry of the Irish Government’s decision to cut tourism VAT in 2011. Accordingly, the Committee recommends that the Government look constructively at a different rate of tourism VAT for Northern Ireland, and calls on HM Treasury and the industry to work together to estimate the potential costs and benefits of doing so.

The Report highlights the negative impact of high levels of air passenger duty on tourism in Northern Ireland and argues that abolishing APD on all flights would encourage airlines to bring new routes into Northern Ireland. These changes would connect Northern Ireland with key business and tourism markets. We recommend that the Government and the next Northern Ireland Executive should re-examine the economic case for abolishing APD on flights to and from Northern Ireland. We also call for the full devolution of APD to the Executive, and for the Executive to implement its planned air route development fund as soon as possible.





17 March 2017