Brian Lenihan Jnr (Dublin West, Fianna Fail)

I assume the Deputy is referring to the periodic informal survey of cross-Border prices undertaken by the Office of the Revenue Commissioners.

I wish to advise the Deputy that the Office of the Revenue Commissioners' periodic informal survey, which provides a snapshot of the retail prices for the main excisable commodities observed in market outlets in Dublin and Newry, was most recently carried out on 21 January 2009. A summary of the results of that survey and of a number of other surveys since February 2007 are published on Revenue's website at www.revenue.ie/en/about/publications/index-cross-border-price-comparisons.html.

In brief, the 21 January 2009 survey, when the euro to sterling exchange rate used was 0.9267, which is reasonably close to the current exchange rate, shows in particular that alcohol and tobacco products were considerably dearer in this State than in Northern Ireland. The price of petrol was about the same, auto diesel was cheaper in this State, while that of home heating — kerosene and diesel — was dearer. Of course, not all of the differentials can be accounted for by differentials in tax or excise treatment. Some of them reflect different prices being charged for the same product between the two jurisdictions.

It has to be recognised that we have a long-standing policy, for sound health and social reasons, of applying high excise rates to alcohol and tobacco products. Our excise rates on such products are higher than those in the UK, which has also followed a policy of imposing high excise rates on such products. Consequently, Ireland has the highest excise rate on wine in the EU. It should be noted that the difference between the excise rates that apply to wine in this State and in Northern Ireland is somewhat smaller than the difference between the rates that apply to other alcoholic products. Ireland has the second highest excise rate in the cases of beer and spirits. The difference between the prices of beer and spirits on either side of the Border is wider than the difference between the price of wine. Excise duty on beer has not been increased since budget 1994. Excise duty on cider has not been increased since budget 2002. Excise duty on spirits has not been increased since budget 2003. Excise duty on wine was increased in last year's budget by 50 cent, inclusive of VAT, per standard bottle, having remained unchanged since budget 1994.

Ireland charges the highest excise rate on, and price for, cigarettes in the EU. The excise rate on cigarettes, inclusive of VAT, has been increased in the last three budgets by a total of €1.30. As Deputies will be aware, there are ongoing demands for the rate of excise on cigarettes to be increased by significantly more. Any further increases in the rate of excise on tobacco will have to be considered in the context of the law of diminishing returns that applies to tax increases.

Additional information not given on the floor of the House.

Due to our high excise rates and higher VAT rate, taxes contribute to our higher prices for alcohol and tobacco products. Non-tax costs also contribute to our higher prices, however, especially in the case of beers, spirits and most wines and, to a lesser extent, in the case of cigarettes. In the case of beer, non-tax cost differences are high. The overall price differences for cans and bottles of beer varies from 55 cent to 76 cent. Excise duties and VAT account for between 21 and 24 cent of the difference. Non-tax trade costs account for the remainder of the difference. In the case of petrol, following an excise increase of 8 cent per litre, inclusive of VAT, in budget 2009, the price per litre is broadly the same in both jurisdictions, as is the tax take and the non-tax cost. Auto diesel is approximately 15 cent per litre cheaper here, due to lower taxes. As I have already said, the price of kerosene is higher in this State due to higher taxes and, particularly, higher non-tax costs. Overall, diesel for heating purposes is dearer here despite the tax take being lower than in Northern Ireland.

In comparing indirect tax, we must remember that taxation strategies generally reflect the political choices made by Governments to meet their specific needs and requirements. In this regard, Ireland has focused on achieving a low taxation economy, especially in the area of direct taxation, which includes income tax and corporation tax. This has delivered significant advantages for Ireland's competitiveness. In ensuring a relatively low level of direct taxation on income, we have had marginally higher indirect taxation.

In conclusion, I emphasise that the considerable weakening of sterling relative to the euro has had a far more significant impact on changes to relative prices between this State and Northern Ireland than any tax changes, including those made in the standard VAT rates. For example, sterling has weakened by 36% since early August 2007, and by 18% since early October 2008. The extent of the depreciation of sterling can best be illustrated by cross-Border comparisons of petrol prices. In January 2004, petrol in this State was approximately 27 cent cheaper per litre than in Northern Ireland. Prices are now broadly the same in the two jurisdictions. I use petrol as an example because the Irish and UK excise rates have moved by broadly similar amounts over the last five years. It is clear that exchange rate movements, rather than tax changes, are driving price differentials. I am informed by the Revenue Commissioners that a further cross-Border price survey is being undertaken. In line with usual practice, the results of the survey will be posted on the website of the Revenue Commissioners.

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