Tourism: Taxation

HM Treasury written question – answered on 20th October 2014.

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Photo of Margaret Ritchie Margaret Ritchie Shadow SDLP Spokesperson (Environment, Food and Rural Affairs), Shadow SDLP Spokesperson (Energy and Climate Change)

To ask Mr Chancellor of the Exchequer, if he will assess the effect on the economy in Northern Ireland of the Irish government's decision to retain a reduced rate of sales tax for the tourism industry.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

Latest statistics show that tourism expenditure associated with overnight trips in Northern Ireland has increased by 9 per cent over the last 12 months.

The Treasury has previously considered the impact of a VAT cut for the UK tourism sector on growth and jobs. The conclusion the Government reached is that a VAT cut would not produce sufficient economic growth to outweigh the revenue shortfall. A VAT cut for this sector would therefore need to be funded either by additional borrowing or by raising other taxes, both of which are likely to have a negative effect on the economy. The Government therefore have no plans to introduce a VAT cut for this sector.

Under EU law it is not possible to introduce a specific VAT rate for Northern Ireland that differs from that applied in the rest of the UK.

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