Urgent action is needed to stop shoppers going north of the border, it was claimed today.
Retail Ireland said the VAT rate on goods, particularly alcohol, needs to be reviewed to protect the economy and employment.
The IBEC group that represents retailers said it welcomed reports that Minister for Finance Brian Lenihan had said his decision to increase the VAT rate to 21.5 per cent in last October’s budget was a serious mistake.
The move, made as the UK VAT was cut to 15 per cent and when the euro to sterling exchange rate hit a record high, is believed to have cost the state about €700 million in lost trade to the North.
Director of Retail Ireland, Torlach Denihan, said: “Retail sales fell by the largest annual drop ever recorded last year and 25,000 retail staff will go on the Live Register this year.
“Government should consider a targeted reduction in VAT for a specific period to stimulate retail sales.”
Mr Denihan said alcohol is the single biggest common factor in cross-border shopping trips and demanded urgent attention be given to reducing excise levels on alcohol.
“Our excise rate is 40 per cent higher on spirits and 23 per cent higher on wine than in the North,” he continued.
“Shoppers travel north to buy alcohol and end up buying other items too.
“This is borne out by the fact that in 2008 annual alcohol sales in counties along the northern side of the border increased 88 per cent in December alone.
“This needs to be addressed in the forthcoming special budget in April to safeguard both revenue and employment.”
Labour Senator Alan Kelly said the minister’s comments were stating the obvious.
“It should have been plain to anyone with a titter of wit that increasing VAT, particularly at a time when the euro was strengthening significantly against sterling, would provide a further incentive for shoppers to take their business across the border,” he said.
PA