Leaders in the Northern Ireland hospitality sector are arguing that a reduction in Value Added Tax (VAT) would not translate into lower prices for customers. Instead, they contend that such a cut is necessary to address competitive disadvantages stemming from the region's geography and rising operational costs.
Michael Cadden, chair of Hospitality Ulster, stated that businesses in Northern Ireland are "victims of our geography." Currently, the hospitality VAT rate in Northern Ireland and the rest of the United Kingdom is 20%, significantly higher than the 9% for food and 13.5% for accommodation in the Republic of Ireland. Cadden noted that while VAT differentials have always existed, the ability of Northern Ireland businesses to absorb these differences has been eroded by increasing expenses, including the National Living Wage, National Insurance contributions, and supply chain costs.
Selina Horshi, Managing Director at White Horse Hotel in Londonderry, echoed these concerns, calculating that her business pays nearly £5 more in VAT for every £100 of sales compared to a similar establishment across the border. She described this disparity as amounting to "thousands of pounds in a business each year that we simply don't have."
Horshi also suggested it would be "disingenuous" to claim a VAT cut would directly lead to lower consumer prices. She proposed that the benefit of a VAT reduction would be more effectively utilized by allowing hotels to offer more competitive rates to tour operators, a segment of business that has seen decreased demand due to pricing challenges. She explained that having the ability to lower prices to retain tour operator business could allow her to do a portion of her business at a reduced rate without sacrificing profit margins.