THE CHIEF executive of the Chamber of Commerce in Derry says she believes the proposed VAT increase in the Republic from 21 per cent to 23 per cent will have a beneficial knock-on effect for businesses.
Sinéad McLaughlin said that in the Foyleside shopping centre’s car parks last Saturday and Sunday, a quarter of the cars had Republic registration plates, most of them from Co Donegal.
“We in the chamber do believe that the VAT increase to be announced by the Dublin government will result in more and more people from Donegal and from wider afield in the Republic of Ireland coming to Derry to do their Christmas shopping.
“With the value of the euro at £0.86, roughly the same as this time last year, we expect the extra 2 per cent in terms of the VAT increase to work in our favour.”
Conversely, the sentiment south of the Border in Dundalk, Co Louth, is that the VAT increase will hurt business in the town, which is about 10 miles from the Border.
Paddy Malone of the Dundalk Chamber of Commerce said it was imperative that any VAT rate increase did not come in until after Christmas as many people would change their shopping habits immediately.
He said the experience in 2008 when VAT was increased by just half of one per cent was that customers were driven to shop across the border in Northern Ireland.
He said the economy was too fragile for the VAT increase to be introduced at this time.
“It should have been done on a graduated basis, not 2 per cent in one go. Psychologically it’s a bad message,” he said.
Meanwhile the Irish Small and Medium Enterprises Association said the higher rate of VAT combined with a proposal to repeal retail planning guidelines to allow multiples to locate in out-of-town locations would signal the death knell for the indigenous retail sector.