Government drives cross-border trade says industry body

FDII calls on Finance Minister Brian Lenihan to take "urgent action" to bridge the VAT and business cost divide between Ireland and the UK

Food and Drink Industry Ireland calls on the government to act now before Irish retailers are hit any harder

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In a recent statement, Food and Drink Industry Ireland (FDII) expressed concern at the effects of a reduction in the UK VAT rate by 2.5% to 15% on cross-border shopping. Director of FDII, Paul Kelly said: “Combined with the increase in the Irish VAT rate to 21.5%, which applies to a large volume of food and non-food grocery items, it will further widen the gap in grocery retail prices between the Republic of Ireland and Northern Ireland. We have already seen a 2% drop in food and beverage sales so far this year and this is now likely to get worse.

FDII had criticised Brian Lenihan at an earlier date also, following comments made by the minister in relation to efforts to reduce cross-border shopping in an RTE radio interview on 15 October. “Despite the fact that Minster Lenihan has acknowledged the enormous impact of cross-border shopping on Irish businesses, jobs and the exchequer, the budget has done nothing to address the problem we currently face. If anything, the VAT increase, along with other measures in the budget that add to business costs, have exacerbated the situation,” said Louise Sullivan, senior executive for consumer foods, FDII.

In the recent release, Paul Kelly asserted that the Government must now take “urgent action” to lessen the VAT gulf between north and south and “vigorously attack” Ireland’s higher business costs, such as energy and waste. The facts are stark; VAT is 6.5% higher here, electricity is 15% higher here, waste disposal charges are 100% higher here. Each of these causes untold damage to industry. The Government must undertake real reform on business costs, reduce the VAT differential and also reduce employment taxes in labour intensive sectors like the food and drink industry.”

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