Chambers Ireland Calls For VAT Cut

by Jason Gorringe, Tax-News.com, London

12 October 2006

Chambers Ireland, the country's largest business organisation, has called on the Government to cut VAT rather than income tax in its upcoming pre-election budget, in what it suggests is a "less obvious but equally consumer friendly and more equitable" approach to tax reform.

The Irish chamber network, which has 60 member chambers representing over 12,000 businesses, additionally called on the Government to take the opportunity to address the structure of property taxation in a way that generates an earmarked revenue stream for local government.

Launching the Chambers Ireland pre-budget submission on Wednesday, John Dunne, the organisation's chief executive, stated that:

“In a pre-election budget with healthy public finances it is unrealistic to pretend that there will not or should not be some ‘giveaway’ element. However, this realpolitik does not preclude a genuinely strategic approach to restructuring or rebalancing the public finances.”

“By cutting VAT instead of income tax, consumers still benefit in terms of more money in their pockets and reduced prices. But it would also be less inflationary and more equitable – one third of the population doesn’t pay income tax whereas cutting indirect taxations benefits all consumers."

He went on to explain that:

“The Tánaiste recently suggested that the exchequer could afford to abolish stamp duty and forgo the EUR3bn generated from that tax. This is underlined by the ESRI’s analysis yesterday stating that Minister Cowen has almost EUR3bn discretionary funding available for this budget this year."

“On the other hand, the Indecon report into the financing of Local Government earlier this year projected that within four years, additional expenditure of EUR2bn will be required for local authority service levels to be simply maintained.”

“Linking these two facts, Chambers Ireland is calling on the Government to replace stamp duty with a re-balanced property tax that is ring-fenced for local authority spending. Local communities would be transformed by such an injection of discretionary funding which would dramatically underpin services to business and quality of life."

Other key suggestions contained in the Chambers Ireland pre-budget submission were that the government should:

• Make provision for more venture capital support for start-ups.
• Annually review all tax shelters.
• Refine support for Intellectual Property development.
• Introduce a new, broadly based local property tax and rebalance service charges equitably across the entire community.
• Standardise the VAT rate at 18%.
• Increase VAT exemption thresholds.
• Restore adequate indexation of income tax bands and credits.

Recommended