Read what the Tánaiste and Minister for Enterprise, Trade and Employment had to say regarding a recent Dail Question on the VAT issue. She also comments that her department does not have any programmes or policies in place to specifically support the retail sector.

To  ask  the  Tánaiste and Minister for Enterprise, Trade and Employment the  action  she  will  take,  in  view of the significant price and VAT difference  in  border  areas  and  the  consequent loss of business and employment  in  border  counties as a result, to address this situation; and if she will make a statement on the matter.

                                                           - Fergus O’Dowd.

   Ref No: 44525/08

                                 R E P L Y

Tánaiste   and  Minister  for  Enterprise,  Trade  and  Employment  (Ms. Coughlan)

As I said last week in response to a similar PQ, the fiscal positions of both  countries are very different. In this regard it should be borne in mind that Ireland already has a low tax economy by comparison with other competing  economies,  especially in the area of direct taxation on both business  and  labour,  which  has  a direct impact on all companies and workers  in  the State.  This lower starting position for taxation makes it more difficult to reduce taxes further.

 As  we  are  all  aware, we are running a significant budget deficit for this  year.   Suggestions  by  some  commentators  that  Ireland  should replicate  UK  fiscal  policy  by  reducing our standard VAT rate by 2.5 percentage  points  would cost in excess of €1.1 billion in a full year.  Reducing  the  standard  rate  to the same level as that in the UK (15%) would  cost almost €3 billion per annum. In this regard, it is important to  bear  in mind that any policy to reduce VAT in the hope that it will boost  spending  has  to be assessed with caution as much of its benefit would likely flow out of the State given the openness of our economy.

My  department  does  not  have  programmes  or policies to specifically support  the retail sector.  In response to ongoing concerns in relation to  the level of price differences north and south of the border, I have arranged  to  meet  with  Retail  Ireland  to  seek  explanations on the differences.

However  my  development  Agencies are actively supporting firms in the border region.  To further strengthen Irish businesses and employment in border region, Enterprise Ireland will continue to drive improvements in innovation,  competitiveness,  productivity and management capability in Irish companies.  There are currently 2 full time enterprise development programmes   ongoing  in  the  border  region.  This  involves  business incubation  and  training  for 25 entrepreneurs.  Enterprise Ireland has also  run 4 Enterprise Start Programmes in the region during 2008.  This is  a  part  time  support  programme  to  facilitate people who wish to develop and grow an early stage business idea.

To  assist  companies  with  innovation  and  R&D,   The  Institutes  of Technology  in  the  border region have been approved €2,485,773 in 2008 for  a  total  of  18 specific projects. Furthermore, up to August 2008, there  were  a  total of 112 innovation vouchers approved to SMEs in theborder region.

With  regard  to  smaller  enterprises, the County Enterprise Boards are working  to  stimulate  economic  activity  and to promote an enterprise culture  at  local  level.   In  2007 Cavan, Donegal, Leitrim, Louth and Monaghan  CEBs  paid over €1.5m in grant aid to 111 clients and assisted in the creation of 243 net jobs in these counties.  In 2007 2,525 people participated in training through the border CEBs.