Fianna Fáil critical of VAT rise


The New Year VAT hike has been branded a kick in the teeth for smaller businesses which will further hit consumer confidence.

Michael McGrath, Fianna Fail’s finance spokesman, said the increase - which takes effect at midnight tonight - was a major policy mistake.

The 2 per cent jump, bringing the VAT rate to 23 per cent, will also cause more job losses, he claimed.

“Consumers are, by necessity for the most part, more price-sensitive than ever before,” he said.

“This VAT increase will inevitably affect shopping patterns and will undoubtedly cause further job losses in an already distressed retail sector, particularly in the early part of 2012.

“In some cases, for example in car sales, the VAT increase could well mean the difference between a consumer going ahead with the purchase or not.”

Mr McGrath said the move sent out all the wrong signals at a time when the domestic economy badly needed a boost.

“The decision is also a kick in the teeth for the thousands of small andmedium-sized Irish businesses struggling to keep their doors open,” he added.

Mr McGrath said research, by think tank ESRI, showed the VAT increase will disproportionately affect poorer households.

“The unquestionably regressive nature of the package of measures in December’s Budget will become apparent in the coming weeks as the full effects of the Budget emerge,” he said.