DUBLIN, Nov 24 (Reuters) - Ireland's economy has little room to cut VAT sales tax, Irish Prime Minister Brian Cowen said on Monday, despite fears from retailers that the UK's VAT cut could drive more Irish shoppers to neighbouring Northern Ireland.
His comments come as concerns grow about the number of Irish shoppers who head over the border to buy their goods and who are already taking advantage of sterling's recent weakness against the euro. "A small economy doesn't have as much room for manoeuvre as a large economy in that respect," Cowen told reporters in County Offaly.
"Various governments have various budgetary strategies to adapt to ... What we have to do is continue with the strategy we're adopting."
On Monday UK Finance Minister Alistair Darling cut VAT to 15 percent from 17.5 percent, effective from December 1 to the end of 2009, to help boost spending over Christmas and next year.
Trade organisation Retail Ireland said the UK's move made Ireland less competitive and said Ireland should consider a VAT cut to help revive the economy.
"It (the UK's VAT cut) will compound the problem of people crossing the border to shop," said Torlach Denihan, Director of Retail Ireland.
"As a country we need to look at our VAT rate and consideration should be given to a lower rate as part of a package to stimulate the economy and reverse the decline in retail sales." (Reporting by Laurence Fletcher)