LOWER rates of VAT on hotel accommodation and restaurant meals in recent years' has helped to significantly boost Irish tourism, according to a new survey.

Research by international accountants Deloitte Touche Tohmatsu shows reductions in the rate of VAT on tourism services from up to 23 per cent to 10 per cent in recent years has helped to make Ireland one of the cheapest locations for a family holiday in northern Europe.

Switzerland was found to be the most expensive destination. Ireland, which has reduced VAT rates on seven of its tourist and leisure services, is the second cheapest, ahead of Britain.

The survey found VAT on tourism services can vary throughout Europe from 3 per cent in Luxembourg to 25 per cent in Denmark.

This brings the VAT bill on a two week family holiday in Europe to between £97.95 and £758.50, it says.

The accountants' estimates are based on a family holiday in a mid range hotel at the height of the season.

in Ireland, its says a family holiday would typically incur VAT of around £280.

The report, issued yesterday, shows that states in southern Europe and outside the EU have the lowest rates of VAT on holidays and subsequently attract more tourists.

But it warns that low VAT costs do not guarantee a cheap holiday, but merely give some states a competitive edge over their neighbours.

Governments, it warned, must consider the potential for tourism growth through lowering taxes instead of focusing on the inevitable short term loss of revenue.