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VAT cut could be pulled if shops don’t pass it on

The Government has threatened to pull the recent VAT reduction unless shop owners pass it on to customers immediately.

Household names like coffee firms Insomnia and Butler’s Café, are not passing on the cut, according to a survey by broadcaster Newstalk.

The reduction from 13.5pc to 9pc is designed to boost the retail and tourist industries and create jobs.

Junior Minister for Tourism, Michael Ring, said he was disappointed that many shop owners were not passing on the cut.

"I want to say to the people who are not passing it on: you might have short-term gain but it may have long-term effects on your business," he said.

"We are giving you the opportunity,” he added.

“We brought in a stimulus budget a few weeks ago - we also have an opportunity again very shortly if we find this is not being passed on, there will be a budget again in December and this Government can bring the VAT rate up to 13.5pc again."

Shop owners are not obliged to pass on the cut and many have said they are already suffering high business costs and the affects of the recession.