The Minister for Finance is pessimistic about Ireland's chances of retaining duty free sales which are scheduled to end in June of next year.

Mr McCreevy told the Dail last night he expected to receive an independent report he had commissioned on the matter shortly. "Once I have studied this report, I will be in a better position to asses how to take this issue forward.

"In the meantime, although we are committed to trying to obtain a change of heart on the duty-free issue, it would not be right for me to end this statement without saying that in all reality our chances of success are limited. But we will continue trying."

He said the EU plans to abolish duty-free sales for all travel within the EU had been enacted into law, and changing the decision would not be easy. Firstly, the Commission had to be convinced that such a change was necessary, and then all member-states would then have to vote in favour of its proposal.

As a taxation matter, any change in an adopted directive would require the unanimous agreement of all member-states. Even one member-state in opposition would cause any such proposal to fall, he added.

"I stress this procedure here at length because I often get the impression that some in the duty-free lobby think it is a straightforward matter. In reality, it is not like that. Lest there be any doubt, the initiative for any proposals must come first from the Commission. The Commission has, until now, shown no willingness to do this."

Mr McCreevy was responding to a Fine Gael private member's motion condemning the Government for "its lassitude in not seeking to reverse the EU decision of 1991 to abolish duty-free sales". It also called on the Taoiseach to contact all EU heads of government to seek such a reversal.

The party's spokesman on finance, Mr Michael Noonan, said duty-free shopping generated almost 2,000 jobs in Ireland, increasing Aer Rianta profits, which were invested in developing the infrastructure of airports. This was also true of sales at the smaller regional airports.

Duty-free sales on aircraft helped to keep fares down as the profits helped to defray running costs, he added. Duty-free sales on car ferries were extremely important and vital to maintaining low cost competitive services to both the UK and the continent.

Mr Noonan said the Taoiseach, Mr Ahern, as Minister for Finance in 1991, had participated in the unanimous decision to abolish duty free. "He did not have to do so. He could have exercised a veto to protect this vital national interest."

Mrs Nora Owen (FG, Dublin North) predicted that Aer Rianta would lost £40 million in the year 2000, adding that £30 million of that was currently used to keep other costs, such as landing fees and charges to other airlines, competitive.

The Labour spokesman on public enterprise, Mr Emmet Stagg, said as Minister for Finance Mr Ahern should have exercised his veto, but he chose instead not to ruffle the feathers of his fellow finance ministers around the table. "The Taoiseach has always traded on his reputation as a consensus-seeker, but on that night he elevated this quality to the point of absurdity."

Debate on the motion continues tonight.