The upcoming VAT hike will hit poorer people three times as hard as the better paid, one of Ireland’s largest trade unions has warned.
Unite has demanded Minister for Finance Michael Noonan consider his position over the planned sales tax increase to 23 per cent.
Jimmy Kelly, Unite regional secretary, dismissed claims by Mr Noonan that the 2 per cent rise would not hurt the less well off as much as others. “This is purely and simply wrong,” he said.
Mr Kelly pointed to research by leading think tank the ESRI which showed the impact of a 23 per cent VAT rate.
“The result was simple,” he said. “A rise as forecast would impact three times more on low incomes than high incomes.” Mr Kelly said the Minister should either retract his remarks or step down. The union leader said the VAT hike would further stem consumer spending next year and lead to more business cutbacks, closures and job losses.
Unite has called on Labour ministers within the coalition to reject the proposals when they come before Cabinet.
The Taoiseach yesterday defended the decision to add another 2 per cent on to VAT in the upcoming budget.
Enda Kenny said there was a need for "political choices that are unpalatable". He said that, unlike an income tax increase, people would have a choice in relation to VAT in terms of choosing what to buy.
Micheál Martin yesterday called for the planned increase to be reversed. At the party's national councillors’ convention in Mullingar, he said: “The single most important ingredient that we are missing at the moment for economic recovery is consumer confidence. Until this week, all strands of political thought were agreed on this.
“Yesterday, Michael Noonan shattered this consensus by hiking tax on the very activity that we all want to encourage.
"The Government still has time to think again on this issue and reverse the decision."
The Minister for Finance has promised the higher rate of VAT will not be increased again “in the lifetime of this Government” following a 2 per cent increase in next month’s budget.
Mr Noonan described the release of the Government’s budgetary plans to German politicians as “disappointing” but confirmed that the top rate of VAT will increase in budget 2012.
Additional reporting PA