Cross-bor­der shop­pers cost State €300m in tax rev­enue

Irish Independent - - BUSINESS - Colm Kelpie

SHOP­PERS stock­ing up on cig­a­rettes, petrol and al­co­hol north of the bor­der may be be­hind a fall in ex­cise du­ties over the last year, the Cen­tral Sta­tis­tics Of­fice(CSO) sus­pects.

The Brexit-in­duced weak­ness in the pound is al­ready hit­ting car sales here, and now the first signs of an uptick in cross-bor­der shop­ping have ap­peared in the na­tional ac­counts.

The CSO said the €300m fall in taxes on prod­ucts com­pared to last year, the bulk of which is ex­cise, could be down to shop­pers cap­i­tal­is­ing on the weak­ness in ster­ling.

Per­sonal spend­ing is also down 1.1pc quar­ter-on-quar­ter, largely re­flect­ing the fall in car sales here.

“In re­la­tion to taxes and sub­si­dies, they are down by 4.6pc. This is largely to do with re­duced ex­cise re­ceipts,” said Michael Con­nolly, CSO se­nior statis­ti­cian.

“I think it’s prob­a­bly a bit early to say cat­e­gor­i­cally what the cause of this is, but it’s re­lated in some way to the weak­ness in ster­ling and cross-bor­der ac­tiv­ity, cross bor­der shop­ping and cross bor­der pur­chases.”

The pound weak­ened to around 93 pence in re­cent weeks against the euro – heap­ing pres­sure on ex­porters – but it has strength­ened to around 87 pence now on ex­pec­ta­tions that the Bank of Eng­land could be about to raise in­ter­est rates in the com­ing months.

Data re­leased by the CSO yes­ter­day shows that the econ­omy, in GDP terms, grew by 1.4pc in the three months to June com­pared with the pre­vi­ous quar­ter, and 5.8pc year-on-year.

GNP fell 4.6pc on a quar­terly ba­sis, but the CSO said this re­flected the flow of multi­na­tional prof­its.

GDP has fluc­tu­ated con­sid­er­ably in re­cent quar­ters, high­light­ing the prob­lems as­so­ci­ated with re­ly­ing on the mea­sure to gauge the health of Ire­land’s open econ­omy.

The ex­pan­sion in the months to June fol­lowed a re­vised 3.5pc con­trac­tion in the first three months of the year and a 5.8pc jump in the fi­nal quar­ter of last year. In 2015 GDP surged by 26pc, mak­ing in­ter­na­tional head­lines and prompt­ing one renowned econ­o­mist to dub it “lep­rechaun eco­nomics”.

In re­sponse, the CSO, in con­junc­tion with the Cen­tral Bank, is pub­lish­ing a new met­ric called GNI* to strip out the volatile ef­fects as­so­ci­ated with the multi­na­tional sec­tor. Ex­perts also say em­ploy­ment and other eco­nomic gauges such as con­sumer spend­ing gives a bet­ter pic­ture of the health of the econ­omy than GDP.

GNI* will be fully phased in by the end of 2018 and has shown that at €189bn, the econ­omy is nearly one-third smaller than the size sug­gested by the GDP fig­ures.

Fi­nance Min­is­ter Paschal Dono­hoe said the Gov­ern­ment’s tar­get for GDP growth this year re­mains on track.

“To­day’s data pro­vides clear ev­i­dence of con­tin­ued mo­men­tum in the econ­omy this year with an­nual GDP growth of 5.8pc recorded in the sec­ond quar­ter. Im­por­tantly the growth in the econ­omy is broadly bal­anced with pos­i­tive un­der­ly­ing con­tri­bu­tions from both the do­mes­tic and ex­ter­nal sec­tors.”

An­a­lysts re­mained up­beat on the econ­omy’s per­for­mance.

“With the lat­est read­ings from all three PMIs – ser­vices, man­u­fac­tur­ing and con­struc­tion – well above the 50 line sep­a­rat­ing growth from con­trac­tion we see no rea­son not to ex­pect solid growth into the year end,” said Philip O’Sul­li­van, econ­o­mist with spe­cial­ist bank In­vestec.

Alan Mc­Quaid of Mer­rion Cap­i­tal said the GDP num­bers are pos­i­tive, “es­pe­cially when one al­lows for the dis­tor­tions of IP prod­ucts on the econ­omy”.

‘It’s re­lated in some way to weak­ness in ster­ling’

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