Cross Border Shopping Fears Hit Southern Exchequer

Losses to the Irish Exchequer on foot of cross-border shopping are now so large that a series of questions aimed at providing a more detailed picture of the extent of such activities are to be added to the Republic's Quarterly National Household Survey.

The questions will ask how frequently people travelled to Northern Ireland to shop, what they bought and how much they spent on their purchases. The results will be released in the third quarter of 2009.

The findings will be used to gain a more accurate picture of the extent of cross-border shopping and to validate estimates made by the Revenue Commissioners in their report on 'The Implications of Cross-Border Shopping for the Irish Exchequer', which was published last week.

This report is the first significant attempt to measure the impact of cross-border sales since 1988.

The report was carried out following a request by the Irish Minister for Finance Brian Lenihan last year.

While differences in costs, profit margins and VAT in the two jurisdictions were contributing to the rise in the number of people travelling north to shop, the report found the primary reason was the sharp depreciation in the value of sterling last year.

The standard rate of VAT in the Irish Republic was increased by 0.5 of a percentage point to 21.5% in the October budget.

Northern Ireland - as part of the UK - lowered its VAT rate by 2.5 percentage points to 15% in its budget, but the impact of these changes is described as "relatively limited".

The huge rise in the Euro against sterling from 74 pence in January 2008 to 96 pence by last December, to trade at around 94 pence to the Euro at present has been the major factor.

Shoppers from the Republic spent between €350 million and €550 million in Northern Ireland last year.

Irish Exchequer losses in terms of VAT and excise duties last year are estimated at up to €56 million and would reach €72 million in 2009 if the increase in cross-border spending this year matches the report's higher forecasts and reaches €700 million.

See: Border Budget Bonanza For NI

(BMcC/JM)