Why Vat reform makes sense

While there is growing speculation that the forthcoming budget might include income tax cuts, I think it is important that we consider reform of the Vat system instead.

Vat is unique in that it is hated by most of the political spectrum. The left hates it because it is regressive and unfairly hurts the poor. The right hates it because it suppresses commerce and drives down cross-border competitiveness.

Under the current Vat regime, oxygen, gum shields, safety helmets and incontinence pads are subject to the standard rate of 23%, while gold sovereigns for investment purposes, lobster and stockbroker’s fees are exempt from Vat. Membership of a golf club is exempt, but membership of a pitch and putt club is subject to 9% Vat. While dance lessons (including Irish dancing) are subject to 23% Vat, ballet is totally exempt. To rent and sit on a horse is taxed at 4.8%, but the luxury of sitting on a geriatric chair is taxed at 23%.

We have two different agricultural rates — 4.8% and 5.2%. We have a tourist incentive rate of 9%, a standard rate of 23% and a reduced rate of 13.5%. This whole area is ripe for reform. If we start with the principle that the country cannot afford a reduction in Vat earnings but add to that that pricing can influence behaviour, we can begin to shape a plan for how to reform the system. We also need to look at the whole area of Vat refunds so that we can simplify the system.

I am proposing that the two agricultural rates should be merged at a new rate of 5%. I am also proposing that we review all exempted items and see if they should be exempted. I suggest that we move many items up from the exempt level to 5% and with the extra revenues we begin to move items off the three higher rates down to the 5% rate.

The international picture on sales taxes suggests that the most successful economies tax as many things as possible, at as low a rate as possible. We should emulate this.

Cllr Brian Collins

Labour Party

Kells Town Council