The Minister for Finance Michael Noonan TD has confirmed in reply to a parliamentary question from Fianna Fáil Finance Spokesperson Michael McGrath that the Minister’s estimate of the yield from a 2% hike in the top rate of Vat takes no account of the reduced consumer demand the increase will certainly to.
Deputy McGrath stated, “The admission by Minister Noonan that his estimate of the extra revenue for the State from increasing the top rate of Vat to 23% does not factor in any reduction in demand is quite incredible. In arriving at the estimate of €670m of additional revenue for the exchequer, the Minister has confirmed the estimate ‘does not take into account any behavioural change on the part of taxpayers as a consequence of such a measure’.
“If you speak with retailers in any town, village or city in Ireland, they will tell you that a 2% increase in Vat will lead to less consumer demand. In the border county areas, retailers are adamant the Vat increase will encourage more consumers to shop across the border.
“At a time when consumers are very sensitive to price, a 2% Vat increase will certainly depress consumer demand and will cost jobs in our economy. At a time when people are struggling to make ends meet, consumer demand is price elastic and it is inconceivable the Minister has not taken this into account in calculating his figures. It is not too late for Minister Noonan to change his mind and drop the proposed Vat increase which will only lead to weakened consumer confidence, less spending in our economy and less jobs in the retail sector.”