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Don't Add More Misery To Ireland's VAT Hike, Retail Group Says

by Jason Gorringe,, London

05 December 2011

With a value added tax (VAT) hike already confirmed for the upcoming Budget, the Irish government must be careful not to hit the struggling retail sector still further, Retail Ireland has said.

Setting out its pre-budget submission, Retail Ireland, the Irish Business and Employers Confederation group that represents the Irish retail sector, warned of the 'enormous impact' the Budget will have on the Christmas shopping period. Chairman Frank Gleeson said that it should instead contain measures that boost consumer confidence and get people spending again.

After a draft of the Budget was leaked to the German parliament last month, Finance Minister Michael Noonan was forced to admit that a 2% VAT increase was on the cards for his December statement. This will take Ireland's standard rate of VAT to 23%, but will not effect the lower rates of the tax, which include a 9% levy introduced earlier in the year to help boost the tourism sector. While the Coalition's Programme for Government had set out plans for future VAT rises, the first of these was not initially expected until 2013, with a further hike projected for 2014.

As a result of Noonan's plans, Gleeson has called on the government not to increase excise duty. He said: "The budget adjustment must focus on reducing expenditure as opposed to tax increases, as this is less damaging to growth and recovery. It was confirmed recently that VAT is to increase by 2% in the forthcoming Budget, which will depress consumer spending and hit the already struggling retail sector. In view of the negative effect that this will have on retail sales, it is essential that excise is not increased in the budget."

Retail Ireland instead proposes that the Budget contain a vigorous campaign against diesel laundering, tobacco smuggling and the sale of counterfeit branded merchandise. Gleeson stressed that these various forms of crime represent hundreds of millions in lost taxation and cost the retail sector similar amounts in lost sales.

“The VAT increase makes it essential that urgent action is taken through legislation to assist retailers struggling because of unsustainable rents. In addition, next year consideration should be given to moving the Budget to earlier in the year and away from the vital pre-Christmas trading period. As we enter the critical pre-Christmas shopping period decisive action is needed to encourage consumers to spend some of the 12% of income currently saved. There should not be any further increases in taxation on consumers on budget day and the necessary adjustment in the public finances should be made through reducing public expenditure”, Gleeson concluded.

TAGS: tax | economics | business | value added tax (VAT) | Ireland | fiscal policy | budget | excise duty | retail

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