VAT INCREASE:THE 2 per cent increase in the top rate of VAT which Minister for Finance Michael Noonan confirmed would be part of December's budget will cost the average household more than €500 a year.
It may also put some retailers who are struggling to stay afloat out of business and will not generate as much revenue for the Government as Mr Noonan has claimed it will, according to representatives of the retail sector.
The increase will see alcohol, computers, adult clothing, cosmetics, diesel, petrol and hundreds of other everyday items climb in price.
Goods which are charged at the lower rate of 13.5 per cent include coal, heating oil and gas, electricity and building services while a lower 9 per cent rate is charged on tourism-related services.
Torlach Denihan, director of Ibec’s Retail Ireland, said the rate increase would “delay any recovery” and called for the Government to reconsider it.
“It will bring about a drag on spending which will damage the retail sector. We knew we were going to have VAT increases but we had been led to believe that it would be done incrementally and would be delayed until 2013,” he said.
The policy director at the Dublin Chamber of Commerce, Aebhric McGibney, agreed and said the increase would “further dampen a currently fragile consumer confidence”.
She said the yield would not be close to the €670 million which Mr Noonan said he hoped to raise and said it might not even generate any additional revenue for the exchequer.
David Fitzsimons of Retail Excellence Ireland described the rate increase as “disappointing”.
Mr Fitzsimons said there would now be a three-point gap between the highest VAT rate in the Republic and the North
This, coupled with the fact that “the Government has done nothing to realign competitiveness by abolishing upward-only rent-reviews and reducing rates”, would see people crossing the Border to shop again.