Terence Flanagan (Dublin North East, Fine Gael)
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Question 143: To ask the Minister for Finance the amount of revenue over the past two years that has been lost in taxes as persons from here shop in the Northern Ireland; and if he will make a statement on the matter. [34844/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Revenue Commissioners and the Central Statistics Office (CSO) prepared a report, at my request, on the Implications of Cross Border Shopping for the Irish Exchequer. The report was published on my Department's website on 20 March 2009. The report estimated the value of cross-border shopping in 2008 to be in the range of €350m to €550m; representing an increase in the order of around two-thirds compared to 2007, with the resulting VAT and excise duty revenue loss to the Irish exchequer estimated to be between €58m and €90m (the higher estimate represents under 0.5% of the total VAT and excise revenue in 2008).

In addition to the VAT and excise loss, there was a possible corporation tax revenue loss that was tentatively estimated to be in the range of €15m to €24m. However, it should be noted that the estimates for corporation tax revenue are provisional and should only be considered as indicative of the potential loss. In regard to 2009, the estimated value of cross-border shopping was put in the range of €450m to €700m, with a potential VAT and excise revenue loss of between €72m and €112m, and a possible corporation tax revenue loss in the range of €20m to €31m.

The report noted that the main causes of price differentials between goods in Northern Ireland and the Republic were operating costs, profit margin (mark-up), taxes and a significant depreciation of Sterling against the Euro. While changes then made in the standard VAT rates widened some price differentials, their impact however remained small compared to the size of the change in the exchange rate. The report also noted that there was rather limited availability of quantifiable data on cross-border shopping. Consequently, with a view to improving the data available, Revenue and the CSO subsequently worked on questions for inclusion in the Quarterly National Household Survey (QNHS) to facilitate a more detailed assessment of cross-border shopping.

In that regard, the CSO published on 4 December 2009 the results of a survey of cross-border shopping as part of their Quarterly National Household Survey (QNHS) Q2 2009. The results showed that 16% of households in the Republic made a shopping trip to Northern Ireland in the twelve months to Q2 2009, with 41% in the border area and 21% in Dublin so doing. The report estimated the total expenditure between Q2 2008 and Q2 2009 on cross-border shopping trips at €435 million. This is generally in line with the estimations published in the March 2009 Report on the Implications of Cross Border Shopping. The QNHS also showed that the majority of trips involved purchases of groceries (80 per cent), with alcohol (44 per cent) and clothing and durables (42 per cent) being popular as well.

Based on the data contained in the CSO's QNHS survey on cross-border shopping, Revenue have estimated that the VAT and Excise loss in 2008 due to cross-border shopping, taking into account seasonal adjustments for the Christmas period, would be in the region of €90 million. The 2010 CSO Quarterly National Household Survey module on cross-border shopping was conducted and completed in Q2 but there are no results available yet. On receipt of the results, Revenue will estimate the tax losses for 2009 and into 2010 arising from cross-border shopping.

I would, however, add that the Irish standard VAT rate was reduced in the last Budget from 21.5% to 21% with effect from 1 January 2010. The UK standard VAT rate has reverted to 17.5% from 15% with effect from 1 January 2010. This means the standard VAT rate differential between Ireland and the UK has been reduced from 6.5 percentage points to 3.5 percentage points. In addition the excise duty rates on alcohol products were reduced by around 20% with effect from 10 December 2009. These measures combined provide less incentive for people to shop outside the State.