I understand that the Democratic Unionist Party Manifesto for the 2017 Westminster Election advocates a cut in the VAT rate for tourism services in Northern Ireland. The policy paper annexed to the Confidence and Supply Agreement between the Conservative Party and the DUP provides for a detailed consultative report to be commissioned into the impact of VAT and Air Passenger Duty on tourism in Northern Ireland and to recommend how best to build upon the growing success of that sector.
VAT on tourism activities has applied at the 9% VAT rate in Ireland since 1 July 2011. In the UK and Northern Ireland the UK standard VAT rate of 20% is applied to tourism services such as hotels and restaurants. Under current EU VAT rules the UK is entitled to introduce a VAT rate on hotel and restaurant services as low as 5%, but has not done so to date. Pricing, as you will be aware, is made up of many elements and VAT is only one such component, and any VAT changes in the north may not significantly affect changes in pricing as a whole.
The main aim of reducing VAT in Northern Ireland would be to incentivise growth in tourism and tourism jobs in Northern Ireland and this will not necessarily have a negative impact on tourism in the Republic. Ireland is marketed by Tourism Ireland as a single destination in overseas markets and the DUP proposal, if implemented, could make the island of Ireland a more attractive destination as many overseas visitors would visit both jurisdictions on a trip.
With regard to the impact of the DUP VAT commitments on the retail sector in the border region, there has been no suggestion or recommendation to reduce VAT on retail goods and services in the North.
