Fears hefty VAT hike would further damage retail sales
SPENDING taxes are set to rise next year in a move retailers and business groups said would further depress consumer confidence and do nothing to get householders buying again.
Yesterday Finance Minister Michael Noonan admitted that Value Added Tax (VAT) rates would rise in next month's Budget. But he would not specify what the rate would go to.
The medium-term fiscal statement he published yesterday says that the top VAT rate will go from 21pc to 23pc. But it does not set out when exactly this will happen over the next three years.
Speculation now centres on hefty VAT rises in next month's Budget. Business lobby group Chambers Ireland said hiking VAT was a bad idea.
"We are concerned that the absence of a commitment not to raise VAT in Budget 2012 will result in reduced consumer confidence and in turn further declines in retail sales and possible job losses," it said.
Currently VAT at 21pc is charged on a whole host of items including adult clothing, household goods, some food and drink and some medicines.
A rate of 13.5pc is charged on coal, heating oil and gas, electricity and building services. A lower 9pc rate is charged on tourism-related services.
Mr Noonan said reduction in VAT for tourism-related services and products would stay in place in an attempt to generate jobs from increased visitors.
Ernst & Young tax partner Joe Bollard commented: "The question appears to be not if the standard rate of VAT will increase to 23pc, but rather over what time scale it will occur."
Business lobby group IBEC said it was disappointing the Government was planning to raise a total of €1.6bn in tax measures next year, rather than cutting out waste.