Booming black economy threatens retailers

Ireland’s black economy is booming even as legitimate enterprises are enjoying record increases in sales.

New figures from the Central Statistics Office show there was an increase of 5.1% in the annual retail sales figure, but smuggling is continuing to put pressure on profit margins, according to retailers.

Isme, the Irish Small & Medium Enterprises Association, has called on the Government to refocus its efforts on the effect the black economy is having on the retail sector. The association demanded that much more emphasis be placed by Revenue on combating rogue traders.

According to Isme, year on year retail sales figures showed an increase of 5.1% in volume but only 2.5% in value. When the motor trade is excluded, sales were 3.6% higher in volume and 1.3% in value compared with 2015, clearly showing continuing pressure on margins as retailers reduce prices to stimulate demand.

Isme CEO Mark Fielding said: “In addition to reduced margins, the black economy is booming and the effects of smuggled cigarettes and other goods on small local stores is devastating.

“The massive unfair advantage created by non-payment of excise and taxes within the black economy is creating havoc for compliant retailers. The Revenue Commissioners must put more emphasis on the eradication of rogue traders who have a competitive advantage, which is causing job-intensive SME retailers to suffer and in some cases, close.”

“The Government must implement policies to tackle the scourge of the black economy and the reduction of the cost base in order to secure the thousands of retail jobs in the economy,” Mr Fielding added.

His concerns were echoed by the group Retailers Against Smuggling which pointed in particular to the sale of smuggled solid fuel and tobacco products.

In the first five months of 2016, Revenue seized smuggled tobacco products worth almost €12.3m to the Exchequer, an increase of €2m over the same period in 2015.

Meanwhile, the solid fuel sector has expressed concern over the fact the Revenue has no reliable way to estimate the size of the smuggled solid fuel trade across the border. This €2m increase came following the excise increase of 50c in October 2015.

Benny Gilsenan, retailer and RAS spokesperson for Leinster, said: “I struggle to see the logic of increasing excise tax not only because it drives people to the black market but it also leads to a tobacco tax yield budget shortfall which was calculated by the government in 2015 as being €223m.

“The Government really has to address the elephant in the room which is that excise increases are only contributing to the problem. On that basis alone, RAS calls for a moratorium on further excise increases until levels of smuggling are tackled.

“The fact that one in 10 cigarette packs are illegal highlights that more intervention is necessary by the Government to cut off the blood supply of these multi-million euro businesses run by criminal gangs. Legitimate businesses like mine are being directly affected.

“To make matters worse, of the 5,927 seizures in 2015, fines averaging €2,656 were imposed in just 89 cases. The current legislation for attaching fines only covers those already in employment. This needs to be extended to those on unemployment or on benefits in order to begin to deter people from selling smuggled goods.”


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