Lenihan urged to reverse VAT rise

FINANCE Minister Brian Lenihan is being urged to drop plans for a half per cent increase in VAT in 2009 when he brings the Finance Bill to the Dáil today.

The call was made after it was announced the rate of VAT would be reduced in Britain resulting in a fall in the price of consumer products and an increase in the number of people travelling across the border to shop.

This will lead to a 6.5% difference in VAT between Britain and Ireland something that will “hasten the stampede of shoppers” to the north, according to Labour party finance spokeswoman Joan Burton.

“It seems unbelievable that when the British chancellor, Alistair Darling, is slashing VAT rates from 17.5% to 15% that our Minister for Finance, Brian Lenihan is increasing our top VAT rate from 21% to 21.5%, one of the highest rates in Europe,” said Ms Burton.

She said this Christmas is already going to be hard on retailers who rely on this time of year for the bulk of their sales.

“Irish businesses are already reeling from the credit crunch and the reluctance of Irish banks to lend to viable businesses. Now to add to their woes, they are losing further competitiveness to our neighbour and nearest competitor. This is a crippling double-whammy,” she said.

“Brian Lenihan should take the opportunity of the introduction of the Finance Bill in the Dáil tomorrow to drop his disastrous decision to increase VAT rates by 0.5%. It was always difficult to understand the logic of a 0.5% increase,” said Ms Burton.

Fine Gael spokesman on finance Richard Bruton said: “This huge difference in the rate of VAT, together with the much higher cost of doing business here, will wipe out thousands of businesses and make it very difficult for the economy as a whole to trade its way out of the recession.”

He said the British government “are now taking bold steps to make it easier to cut VAT, to reduce the tax on small businesses, to reduce tax on the low paid with the view to stimulate their economy.”

Mr Bruton added: “We’re doing precisely the opposite.”

Fine Gael is proposing a full year freeze of public sector pay under the national pay deal.

The Department of Finance said last night that there are no plans to change next year’s VAT plans under the Finance Bill, which will be presented to the Dáil today.

Fianna Fáil Dublin North TD, Darragh O’Brien, told RTÉ yesterday: “We have over the last 10 years reduced taxes substantially. If you compare us to other European countries and economies, we are still a low direct tax economy.”