Sunday 4 December 2016

VAT hike will be 'final straw' for smaller retailers

ISME urges minister to rethink plans or risk 'thousands of job losses' in struggling sector

Published 04/12/2011 | 05:00

Retailers have made a last-minute plea to Finance Minister Michael Noonan urging him to abandon the planned two per cent VAT hike in Tuesday's Budget.

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ISME, the Irish Small and Medium Enterprises Association, said the Government should immediately introduce a retail strategy group, as failure to address the concerns of the sector had had "a calamitous impact, with hundreds of company closures and thousands of job losses".

ISME chief executive Mark Fielding said: "The retail sector is hanging on by a thread. Any further policies by Government that lead to cost increases or undermine consumer confidence will have a devastating impact on a sector that has been haemorrhaging for the last number of years.

"The threat to significantly increase VAT and change retail planning guidelines would be the final straw, particularly for smaller retailers who are already trying to compete with the big multiples," Mr Fielding said.

"With retail volumes down 3.8 per cent and sales down 3.7 per cent annually, it is absolutely essential that no new additional taxes, including VAT increases and excise duties, are introduced in the upcoming Budget, which would have the impact of undermining consumer confidence, further reducing demand and driving thousands of shoppers across the Border.

"It is essential that consumers are given as much encouragement as possible to shop locally and, in the process, secure local jobs and local businesses," he said.

Mr Fielding blamed the Government for failing to introduce the previously promised retail strategy group, which could address the issues of rates, wages, rents and energy costs, which continue to threaten viability of many businesses.

"Instead, they seem hell-bent on undermining the sector further and the 250,000 jobs operating in the industry, with the threat to increase VAT and extend retail planning guidelines, which will sound the death knell for many smaller retailers," he concluded.

Meanwhile, the Irish Employers for Affordable Rates organisation (IEAR) has described the 1.7 per cent reduction in the Dublin City Council's 2012 commercial rates, announced last week, as disappointing. Chairman John Conran said that IEAR welcomed the fact that Dublin City Council recognised that commercial rates were too high but described the size of the reduction as "derisory" and "just paying lip service to struggling businesses".

He said that IEAR was also dismayed that councillors had changed the original commercial rates reduction of two per cent as proposed by council officials to 1.7 per cent.

"Businesses are suffering hugely and jobs are being lost. High commercial rates are contributing greatly to that. IEAR is seeking at least a 15 per cent drop per annum for the next four years in order to have any positive impact on businesses," said Mr Conran.

Falling retail sales suggest that the Government target of raising €670m from a two per cent VAT increase will not be met, according to Dublin Chamber of Commerce.

Chamber chief executive Gina Quin said that a two per cent VAT rate hike will further dampen consumer spending.

"The CSO's retail sales figures to October this year are down 3.8 per cent on the previous year in volume and 3.7 per cent in value.

"Department of Finance figures prepared in 2010 estimated that a two per cent increase in the higher rate of VAT would bring in about €600m, which was down from an estimated €800m the previous year.

"With slowing retail sales, Dublin Chamber are concerned that the revenue gained from an increase in VAT would be offset by losses in sales," said Ms Quin.

Sunday Independent

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