VAT cut ‘vital’ for retailers as Britain holds its 15% rate

THE pressure on the retail sector will continue given the British government’s decision to retain its 15% VAT rate until the end of the year.

Retail Ireland, a representative group affiliated with employers union IBEC group, said the Irish Government must now consider a cut in the VAT rate here.

Director of Retail Ireland, Torlach Denihan, said: “Our higher VAT rate is one of the factors encouraging shopping by Irish residents in the sterling area.

“This is not confined to the North as it involves cities such as London and Manchester, as the analysis of credit card payments recently revealed.

“Our Government should consider a VAT reduction to stem the loss of business, revenue and employment, which is affecting a sector that is already in serious difficulty.”

The British chancellor kept corporation tax at 28%, which is good news for Ireland given its low corporation tax rate of 12.5%.

The Northern Ireland Independent Retail Trade Association (NIIRTA) expressed disappointment with yesterday’s budget.

NIIRTA chief executive Glyn Roberts said: “On balance this is a disappointing budget with very little for small businesses that are struggling with the recession.

“During this challenging economic climate, we would have liked to have seen targets designed specifically to stimulate consumer spending and to encourage businesses to take on more staff. Although the targets set to improve the situation for under 25s through training are to be welcomed, it will have in reality little impact on unemployment.

“It is not just the independent retail sector which will suffer — the local economy as a whole will be adversely affected due to the extra efficiencies required.”

The pound fell against the euro and the dollar yesterday after chancellor Alistair Darling forecast a massive increase in British public debt.

In his budget speech, Mr Darling said that debt would increase to 68% of Britain’s economic output next year. Analysts said the rise had triggered concerns about whether investors would be as willing to buy British bonds.

The euro rebounded against sterling, climbing to an eight-day high of 0.8987. The single currency had hit a two and a half month low of 0.8785 last week.