THE MINISTER for Finance has said that scrapping the increase in the standard rate of VAT announced in the budget would make little difference to the increase in cross-Border shopping, which he says is driven by sterling's weakness. The standard rate of VAT was increased by 0.5 of a percentage point to 21.5 per cent in the budget.

Mr Lenihan told the Oireachtas finance and public service committee that he had asked the Revenue Commissioners and the Central Statistics Office to produce a report on the losses to the exchequer from the latest bout of cross-Border shopping by early in the New Year.

Speaking during the committee stage of the Finance Bill, which gives legislative effect to the budget day measures, Mr Lenihan promised that a review of Irish betting tax laws will be completed quickly in the new year to respond to a shift in spending away from on-street bookmakers to telephone and internet operations.

Some bookmakers are now routing telephone calls to their Irish-based operations through the Isle of Man, the Channel Islands or elsewhere to ensure they are not subject to the betting turnover tax. The tax, which was introduced at 1 per cent in 2000, is to rise to 2 per cent from next May, is used to fund the Irish horse and greyhound industries, but revenue will continue to fall because "the tax base is too small", said Mr Lenihan.

Telephone and internet betting is threatening the viability of the Irish horse breeding industry, which employs 14,000 people, said Fine Gael TD Seán Barrett, who owns an equine insurance company.

The Government, he said, should consider following the example of the United States and ban the use of credit cards for internet betting if bookmakers are not prepared to pay a share of the revenue from these operations to the State.

Mr Lenihan also said that the Government cannot impose the €10-a-head travel tax that will be paid next year by millions of air travellers on wealthy business executives flying private jets from Irish airports.

Under the Government's plan announced in the budget, every air passenger on commercial flights will be charged €10, although, in an effort not to hurt small regional airports, those travelling less than 300 miles will pay €2.

Following Opposition complaints after the budget, Mr Lenihan investigated whether executive jets could be taxed, but found that the majority of the jets used are not registered in the State. The aircraft that are Irish-registered could "go offshore along with their owners. From a revenue point of view there is very little that can be done," said Mr Lenihan.

The tax will not apply to aircraft with fewer than 20 seats, which effectively exempts almost all of the executive aircraft used by Irish business executives.

Fine Gael TD Richard Bruton suggested that aircraft owners should pay a flat fee for half of their seat capacity to encourage them for environmental reasons to fill as many seats as possible.