Tourism businesses across Ireland have been urged to pass on a new reduced VAT rate of 9 per cent as part of the government's bid to increase inbound tourism and create jobs.

VAT on tourism products has been reduced from 13.5 per cent until December 2012, before being reviewed in the country's 2013 Budget to ascertain its impact on the sector. Leo Varadkar, minister for transport, tourism and sport, said that the measure was a key part of the government's Jobs Initiative but would only work if the cut was passed on.

Varadkar said: "The Restaurants Association of Ireland and the Irish Hotels Federation are fully behind this initiative, and have called on their members to lower prices accordingly. I would urge customers to support those businesses that are passing on the lower VAT rate." Adrian Cummins, chief executive of the Restaurants Association of Ireland, said: "This is the first step in the road to recovery in the restaurant sector in Ireland."

Irish Hotels Federation chief executive Tim Fenn said: "We believe the initiative will provide a much needed boost in trade with knock on effects in terms of job creation within the tourism industry." Kurt Janson, policy director at the Tourism Alliance, said the move showed a fundamental difference in approach between the Irish and the UK governments.

Janson said: "Ireland, along with almost all European countries, recognises that if they are to stimulate growth and increase employment, they cannot afford not to reduce VAT. "The [UK] government needs to urgently review its position if the targets it has set for tourism growth in the new Tourism Policy are to be achieved."

Image: Tourism Ireland/Holger Leue