Cross-border shopping set to rise as British VAT cut confirmed

The rate of VAT in the North is set to fall from 17.5% to 15%, British Chancellor Alastair Darling confirmed in today’s Pre-Budget Report.

The tax reduction, set to be introduced on December 1, is likely to further encourage shoppers in the Republic to make to journey North in an effort to save money on their Christmas shopping.

“I … propose to cut VAT from 17.5 to 15% until the end of next year,” said Darling this afternoon. “This VAT reduction will come into effect next Monday on December 1.”

“The reduction in VAT lowers the amount of tax paid on tobacco, alcohol and petrol.”

The Northern Ireland Independent Retail Trade Association expressed concern however that the 2.5% decrease in VAT may not have the required impact to get consumers spending again.

Glyn Roberts, NIIRTA Chief Executive said: “The PBR does make some positive proposals for restoring business and consumer confidence as well as stimulating demand and getting people spending more.

“However, I would question how effective an impact the 2.5% reduction in VAT will have on retailers. Most food products are already exempt from VAT and the very small decrease in VAT will result in very small reductions in those products which are covered by VAT.

“Some retailers are already running sales reducing products by upward of 20-30%-a 2.5% decrease would have little real impact in seeing real drop in prices which would encourage consumers to spend more.”