Household survey to include questions on cross-Border shopping

 

A SERIES of questions aimed at providing a more detailed picture of the extent of cross-Border shopping are to be added to the Quarterly National Household Survey.

The questions will ask how frequently people travelled to the North to shop, what they bought and how much they spent on their purchases. The results will be released in the third quarter.

The findings will be used to gain a more accurate picture of the extent of cross-Border shopping and to validate estimates made by the CSO and the Revenue Commissioners in their report on The Implications of Cross-Border Shopping for the Irish Exchequer, which was published yesterday. This report is the first significant attempt to measure the impact of cross-Border sales since 1988.

The report was carried out following a request by Minister for Finance Brian Lenihan last year.

While differences in costs, profit margins and VAT in the two jurisdictions were contributing to the rise in the number of people travelling North to shop, the report found the primary reason was the sharp depreciation in the value of sterling last year.

The standard rate of VAT in the State was increased by 0.5 of a percentage point to 21.5 per cent in the October budget. Britain lowered its VAT rate by 2.5 percentage points to 15 per cent in its budget. The impact of these changes is described as “relatively limited”.

Last year the euro rose in value against sterling from 74 pence in January to 96 pence by December, a gain of 30 per cent with most of the increase coming in the second half of the year. At 6pm yesterday sterling was trading just below 94 pence to the euro.

The impact of sterling depreciation means an item costing £500 (€675) in January 2008 could have been purchased for just €510 by the end of the year.

The report estimated the annual spend by residents in the Republic in the North and also calculated the potential impact on the exchequer in lost VAT, excise and corporation tax revenues.

Shoppers from the Republic spent between €350 million and €550 million in the North last year.

Exchequer losses in terms of VAT and excise duties last year are estimated at up to €56 million and would reach €72 million in 2009 if the increase in cross-Border spending this year matches the report’s higher forecasts and reaches €700 million.

It also provides an estimate for the amount of corporation tax foregone because profits for retailers in the Republic were lower last year due to the impact of cross-Border shopping. For 2008 this lost corporation tax is estimated at up to €24 million.