Martin Mansergh (Tipperary South, Fianna Fail)

-----what we are primarily discussing. That has a relationship, and I made this point in my opening speech, to economic activity in different sectors. It is not just revenue raising, even if revenue raising is its principal purpose.

Deputy Morgan and Deputy Crawford referred to cross-Border shopping, and I referred to that in my contribution. The Central Statistics Office published the results of a survey of cross-Border shopping on 4 December 2009 as part of its quarterly national household survey of quarter two, 2009. It showed that 16% of households in the Republic made a shopping trip to Northern Ireland in the 12 months to the second quarter, with 41% in the Border area and 21% in Dublin so doing. Anecdotally I would say the percentage going from Tipperary or Cork would be in the low single figures.

The cause of the price differentials between goods in Northern Ireland and the Republic were operating costs, mark-up, taxis and, most importantly, a significant depreciation of sterling against the euro. That said, VAT rates have a certain headline psychological effect independent of their actual substance or weighting in the difference in prices.

There is not more recent data available but the CSO will estimate losses for 2009 and into 2010. However, the UK standard VAT rate, which had been lowered shortly after we put up the 0.5% in 2008, went from 15% to 17.5% in 2010 and will rise further to 20% on 4 January next. The gap, therefore, will be nearly closed; it will have been reduced from 6.5 percentage points to one percentage point. That, combined with a reduction of approximately 20% in alcohol excise duty rates since December 2009, should provide less incentive for people to shop outside the State.

If one goes North of the Border and looks at the prices on the petrol station forecourts they are nominally roughly the same level in sterling as they are in euro, which means, depending on the exchange rate on the particular day, there is probably a 12% or 13% difference between the two.

Deputy Morgan also made the point that VAT, like most forms of indirect taxation, bears more heavily on less well off households. However, it must be borne in mind that this is the reason that food, drink and children's clothes and shoes, for example, are exempt from VAT. It is precisely to counter the effect mentioned by the Deputy. As we know, food in particular constitutes a much larger proportion of spending in poorer households compared to richer ones.

Deputy Crawford raised the question of VAT refunds on wind turbines for farmers, if I am correct. Farmers who are registered for VAT are accountable persons for VAT in respect of all their taxable activities, whether those activities consist solely of farming or of farming and other activities such as the generation of electricity for provision to the national grid. As accountable persons for VAT they are entitled to claim input credit for VAT charged on the installation of alternative energy generators such as wind turbines for use in their taxable activities.

The real issue is that of farmers who are not registered for VAT. They are not in the normal course of things entitled to credit for or repayment of VAT incurred by them on their business inputs. As adverted to by Deputy Crawford, the Value Added Tax (Refund of Tax) (No. 25) Order 1993 provides for refunds to unregistered farmers for tax borne on the construction, extension, alteration or reconstruction of any building or structure that is designed for use solely or mainly for the purposes of a farming business. While the installation of an alternative energy generator may be the construction of a structure, however, such a structure is not necessarily designed for use solely or mainly for the purposes of a farming business but, rather, to generate electricity for wherever it is required. That is the reason the installation of alternative energy generators does not come within the scope of the VAT refund order. However, I appreciate Deputy Crawford's belief that this should be changed.

These are all the issues I noted as having been raised. I thank everyone again for their help in expediting this Stage of the Bill.

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