Thousands of shoppers to flock North after VAT hike
Jobs fears as shoppers to cross border for lower prices
THOUSANDS of shoppers are expected to flood back across the Border after the Government increases VAT on a huge range of household items.
There were warnings last night that the proposed 2pc Budget hike would drive people North -- posing serious threats to the survival of struggling shopkeepers and retail outlets here. Consumers are expected to rush to buy household products, alcohol, cigarettes and petrol here before the new rate hits in six weeks' time.
The VAT gap between the Republic and the North will widen to 3pc in the new year.
Finance Minister Michael Noonan was forced to admit the increase after Budget details were revealed in the German parliament.
Representatives of shopowners warned the tax rise to 23pc would drive consumers across the Border.
The standard rate of VAT is charged on many goods. They include: alcohol, beer, wine and spirits; tobacco and cigarettes; petrol and diesel; non-oral medicines and cosmetics; detergents, pet food, paper, toys and bottled water; jewellery; TVs, CDs and computers; fridges, washing machines and furniture; and tools, hardware, lawnmowers, machinery, car parts and accessories.
A business group that represents the retail sector said the planned VAT increase was a further blow to shopkeepers in addition to the collapse in consumer spending. ‘Worst’ Retail Ireland chairman Frank Gleeson said it would undermine the domestic recovery. “The run-up to the busy Christmas trading period is the worst possible time of year to make these announcements,” he added.
Fine Gael TD John Deasy said the Coalition needed to find the necessary adjustment next year in existing government services and programmes. “I am totally against this hike in VAT right now and I think it demonstrates a total lack of understanding about what is happening in the retail sector in particular,” he said.
The document outlining the VAT hike was an update on the bailout sent by the Government to the European Commission. From there it was passed to each of the EU governments. The German finance ministry gave it to the lower house of the Bundestag because all bailout payments have to be signed off on by the parliament. The European Commission yesterday owned up to being the source of Ireland’s leaked budget information given to the Germans.
But the commission is blaming the Germans for the leaking of the document. Fianna Fail leader Micheal Martin said the leak was incredible and demanded an explanation from the Taoiseach. Taoiseach Enda Kenny said he had “noted the comments” on the document. “I now understand that the commission have confirmed that the document in question was circulated by the commission. “They've also confirmed that the document was not signed by the Irish Government, that no decisions had been made by the Irish Government, and that stands for itself,” he said.
Mr Noonan said: “The information which was leaked corresponded to what I had said when I launched the profiles of the Budgets from 2012 to 2015 just three weeks ago.” The minister said three weeks ago that VAT would go up next year, but he didn’t say by what level.
The Finance Minister said yesterday he would be proposing to the Government that the standard rate of VAT should go up by 2pc from 21pc to 23pc. “Everybody knew there were going to be tax increases in this Budget; choices are limited. I want to increase indirect taxation other than direct taxation, because increases in income taxes cost jobs,” he said.