VAT on magazines will be reduced from 21 per cent to 12.5 per cent under the terms of the Finance Bill, bringing the tax rate charged on such items into line with that of newspapers.

The move will mean that current magazine prices should be reduced by 7 per cent, narrowing the gap between the cover price and the quoted sterling price.

"The reduction in the case of certain printed matter is to help correct a VAT-induced competitive disadvantage for the Irish printing industry vis-a-vis UK counterparts which have a zero rating for most printed matter. "The cost of the measures combined is estimated to be £1 million to the Exchequer in a full year," according to the Minister for Finance, Mr McCreevy.

The president of the National Federation of Retail Newsagents, Mr Ray O'Brien, said that the trade welcomed a long overdue move. Mr O'Brien said the move was a step towards VAT harmonisation within the EU. British visitors in particular queried the price difference which accounted for a £1 sterling magazine selling for £1.51 on Irish shelves.

"You feel as if you are a rip-off merchant. They are not used to VAT on magazines," he said. He added that the move would especially favour children buying comics. "It is their first introduction to enjoyable reading," said Mr O'Brien.

A director of Easons, Mr Basil McAllister, said he was delighted at the announcement which came "out of the blue". He said the magazine market was worth about £100 million annually and a 7 per cent reduction would be a boost to sales. He added that if the Bill were passed, it would be effective from May 1st, regardless of retailers' stocks.