The massive drop recorded in exports to Britain this year could be linked in part to the multibillion pound VAT fraud, which has led to a huge revision in British trade figures, writes Una McCaffrey.
The British government's statistical agency confirmed earlier this week that "missing trader fraud", whereby goods are imported from another EU country and then sold without VAT being paid to tax authorities, had concealed trade worth more than £20 billion (€29 billion) over the past four years.
The phenomenon, which coincided with a 83 per cent jump in Irish exports to Britain, was based to some extent on "carousel fraud", which involves goods being imported into Britain from another EU state, exported again and then re-imported in order to mask the crime.
Most high-profile cases of such fraud in Britain have revolved around electrical or mechanical components. In some instances, goods have moved in and out of the country 35 times.
It is now thought possible that the involvement of Irish companies in the carousel chain may also have had a skewing effect on Irish trade figures, first by inflating them and then by provoking an unusual drop. In 1998-2002, when missing trader fraud was at its peak, import and export trade between Britain and Ireland surged dramatically.
In the year to date however, exports to Britain are running 46 per cent below levels recorded in 2002. Bank of Ireland's chief economist, Dr Dan McLaughlin, said yesterday that, while the euro's strength against sterling may have hit exports to Britain, a 46 per cent fall "does not seem tenable".
The latest figures from the Central Statistics Office (CSO) also show that exports of "electrical machinery and parts" to Britain have declined by 64 per cent this year. "It would seem to be fairly clear that there's something very odd about that particular sub-sector," said Dr McLaughlin, adding that it would be "reasonable" to suggest that VAT fraud had influenced the numbers.
He also highlighted the unusually close correlation between British imports and exports over recent years. In 2001, for example, British goods worth €19.3 million were imported to the Republic, while goods worth €20.8 million were exported. This pattern was repeated in 2002.
In its most recent trade release, the CSO included a special note recording "a very significant fall in the pattern of distributive-type trade" in electrical machinery and parts with Britain.
The organisation said this had borne "a very large influence on year-on-year comparisons of both exports and imports".
A spokesman for the CSO said yesterday that note had been included because of unusual trends in the sector.
He said the organisation had hoped to make it clear that the drop in trade with Britain was not linked entirely to a downturn in the manufacturing sector.
The data analysed by the CSO is sourced from a unit within the Revenue Commissioners.
A spokesman for the Revenue said yesterday that the authority had established a special unit to deal specifically with missing trader fraud but was not currently engaged in an active inquiry.
Such investigations are, he said, typically instigated at the request of the country in which the suspected fraud has been perpetrated.
In Britain, customs and excise authorities have dedicated 400 staff to tackling missing trader fraud with the aim of halving losses to the Inland Revenue by 2004.
They estimate that such losses were worth up to £2.75 billion in stolen VAT in 2001 and 2002.
