RESEARCH INTO the extent of cross-Border shopping has found that up to €550 million was spent by shoppers from the Republic in Northern Ireland last year – with the favourable exchange rate cited as the primary reason.
While changes in VAT rates widened the difference in prices, this was not seen as a significant factor in the number of people travelling North to shop, according to the report carried out by the Revenue Commissioners and the Central Statistics Office.
“Changes in VAT rates have widened the price differentials but they remain small compared to the size of the change in the exchange rate,” the report states.
“Cross-Border shopping is likely to remain an issue as long as sterling remains weak.”
Due to difficulties collating data, a range of estimates is used to value cross-Border shopping. Last year, this was estimated at between €350 million and €550 million, an increase of between €140 million and €210 million on the amounts spent in 2007.
Should sterling retain its current weakness for 2009, the value of cross-Border shopping by residents in the State is expected to rise by between €100 to €150 million, or to an annual total of €700 million at the higher estimate, despite the onset of recession south of the Border.
According to the report, the tax implications for the exchequer in terms of lost VAT and excise duty were estimated at between €58 million and €90 million last year, up from an estimate of between €24 million to €36 million in 2007.
Using current forecasts for cross-Border shopping this year, the report predicts the potential loss of revenue for the State will not rise to more than €112 million.
Alongside the lost VAT and excise, the report notes the potential loss of corporation tax revenues. It estimates that tax forgone in this category amounted to as much as €24 million in 2008 – almost three times higher than the comparative figure for the previous year.
For 2009, the estimated value of corporation tax lost due to cross-Border shopping may reach €31 million, the researchers found. The report was presented to the Cabinet last week. It was carried out to establish the extent to which cross-Border shopping has contributed to the decline in retail sales in the Republic.
