Tax on tourism and flights in Northern Ireland could be slashed once the UK leaves the EU, an influential committee of MPs said.
The hospitality industry pays VAT at a rate more than twice that of competitors in the Republic of Ireland.
EU law prevents member states from setting different levels of the charge for different regions. That power will be repatriated to the UK after Brexit.
Northern Ireland Affairs Committee chairman Laurence Robertson said: “Levels of VAT and Air Passenger Duty (APD) are making businesses less competitive than their equivalents in the Republic of Ireland.
“We are calling on the UK Government to examine options for reducing these tax burdens on tourism and creating the right environment for the sector to flourish.”
Tourism-related businesses in Northern Ireland pay 20 per cent VAT, compared with 9 per cent by their counterparts in the Republic. Northern Ireland is the only part of the UK sharing a land border with another state.
The tax difference creates a competitive disadvantage where businesses in Northern Ireland are forced to reduce prices, hampering their ability to invest or risking losing out on business by being too expensive, the committee said.
Last year, 2.5 million visitors fuelled an industry worth £800m and directly employing 43,000 people.