Tuesday 12 December 2017

David Fitzsimons: A return to the full VAT rate will kill jobs and send us all back into recession

A PHRASE frequently used by ministers is: "The Government doesn't create employment, it simply delivers the environment for employment to thrive."

Back in July 2011, the Government did just that. Finance Minister Michael Noonan took the brave step of reducing the VAT rate for labour-intensive sectors, including restaurants, cafes and hairdressers, from 13.5pc to 9pc. Instead of the normal tweaking of VAT rates by 1pc or less, the minister made a decision which would provoke a response.

Other jurisdictions use significant VAT modification to grow or moderate spending. This was the first time an Irish minister had followed suit. What happened next was incredible. Businesses reduced their prices and customers responded.

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