The benefits of a VAT cut

Madam, – Your Editorial on supermarket price wars (May 16th) draws too narrow a conclusion about the effects on Ireland of cross…

Madam, – Your Editorial on supermarket price wars (May 16th) draws too narrow a conclusion about the effects on Ireland of cross-Border retail trade.

The very rapid restructuring of the entire Irish retail sector has been in full flow since a poor Christmas trading period and has recently accelerated as demand continues to deteriorate. It is hardly surprising that retail sales are in full retreat nor that people are increasingly shopping in Northern Ireland.

More than ever before, consumers are laser-focused on value, so what hope do retailers in the South have of providing competitive value if we must cope with a structural price disadvantage in the form of a 6.5 per cent VAT differential versus Newry?

This is before we even begin to tackle the additional cost of running a business in the South.

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The absence of a policy response by Government or a willingness to engage with the retail sector is a source of concern – perhaps retail jobs don’t matter somehow?

As a retailer operating on both sides of the Border, I have been viewing North/South trading patterns on a daily basis.

This showed that customers in Currys stores in Newry, Enniskillen and Derry with southern Irish addresses generate annual sales of €12 million with a corresponding VAT loss of more than €2 million to the Irish exchequer.

Your estimate of €90 million in VAT lost is a gross under-estimate. A more realistic figure is €200 million and, if we include the income tax and jobseeker effects from lost retail employment, probably close to €300 million.

The UK sees its retail sector in peril and cuts the VAT rate. UK retail sales in April rise by 6 per cent in an environment where consumers are facing many of the same issues as we are.

Ireland sees its retail sector in peril and, after blaming the retail sector for a while, decides to let it rot.

Retail doesn’t need a break, but it does need a chance. Consumers need a break. The country needs €300 million, badly. We need a VAT cut. – Yours, etc,

DECLAN RONAYNE,

Managing Director,

DSG Retail Ireland,

The Park,

Carrickmines,

Dublin 18.