Export levels in May were running 29 per cent below the same month last year but it appears that a substantial portion of the decline is due to a VAT fraud involving goods being moved between the Republic and Britain, wrties Cliff Taylor, Economics Editor
The Central Statistics Office (CSO) warns in the monthly figures for May, published yesterday, that a significant fall in the trade of electrical machinery and parts with Britain is having a very large impact on year-on-year comparisons.
Monthly exports in May were €6.45 billion, while imports of €3.62 billion were down 25 per cent on May 2002. The figures point to a difficult international market but also appear to have been severely affected by the mysterious fall off in the electrical machinery sector.
While the CSO does not identify the reason for this fall-off, it appears that a clampdown on a particular form of VAT fraud, based in Britain but involving companies here, has affected the figures. The fraud involved goods being moved between Britain and the Republic in schemes designed to defraud the British tax authorities of VAT. The ending of these schemes has sharply reduced the levels of exports to Britain and imports from Britain, when this year's figures are compared with 2002.
As reported earlier this month, the amount of trade involved appears to be substantial, with the British government statistical agency estimating that some €29 billion in trade had been involved in so-called "missing trader" schemes over the past four years, although only a portion of this would have involved trade with the Republic.
One scam, the carousel scheme, involves goods being imported into Britain, exported to another EU country and then re-imported, with the goods being sold in Britain and the seller pocketing the VAT. The Revenue Commissioners here have confirmed that they have assisted the British authorities in investigating such schemes.
It appears that the decline in this type of activity is a significant factor in the 47 per cent decline to €8.505 billion in exports to Britain in the January-April 2003 period, compared to the same period last year. The British market accounted for an implausible €4 billion of the overall €6.5 billion fall in exports for the period. Meanwhile in the first four months there was a 42 per cent decline to €4.454 billion in imports from Britain.
Because imports and exports are involved, the figures do not greatly affect the Republic's balance of trade and would not have a major distorting impact on overall national output figures. However, it is not clear whether the CSO plans to revise its export and import figures to try to account for this distortion, which may go back over a period of years.
Overall, exports in the first four months of the year were €26.369 billion, down 20 per cent on the same period last year, with exports of electrical machinery and parts - the sector affected by the VAT fraud - collapsing from €4.746 billion to €1.675 billion.
May exports of €6.45 billion were down 7.5 per cent on April, while imports were 7.7 per cent down to €3.62 billion, leaving a surplus for the month of €2.83 billion.
