Government Plan VAT Rise to 23%

Finance Minister Michael Noonan has announced plans to increase VAT tax by 2% from 21% to 23%.

During a TV appearance on RTÉ’s News at One, Noonan spoke of the planned increase.

The proposals had not been signed off by parliament according to Noonan.

“Well I will take a proposal to government, amoung other tax proposals, to increase VAT from 21% to 23%. The government hasn’t taken any tax decision yet, but I will make that proposal” said Noonan, in a slow and measured announcement.

Noonan conceded that the VAT rise meant that an increase in income tax could be avoided, with the aim of protecting jobs.

There were fears among some commentators that the increase could drive shoppers to the North, where rates are a lower 20%. This could also, according to reports, worsen Ireland’s chance of economic recovery.

Euro currency

The movement from direct to indirect taxation is however according to some economists in-line with OECD proposals.

The VAT increase was leaked with various other details from the budget, which are part of a billion Euro austerity plan.

As well as the 23% VAT rate the plan includes details of an already announced €100 household charge, changes to capital gains taxes and other unspecified sources.

Taoiseach Enda Kenny had been forced to discuss planned austerity measures following a leak, apparently from German politicians.

The fact that proposals were distributed is apparently a mandate of the EC, that information about economic situations of key states are shared between member states.

“On behalf of the Commission the leaks are regrettable,” said Amadeu Altafaj Tardio, according to the Independent.

“But we have a legal obligation to share the information that we receive from the authorities in Dublin with the member states. This is actually our mandate.” worry that the planned VAT increase could hit the Irish consumer hard, at a time when no-one needs any extra strain on their budgets.

The VAT increase will add directly to the cost of living of all Irish consumers, potentially pushing those on the brink into poverty, loans and debt.

VAT is a tax that hits everyone equally, regardless of a person’s level of wealth. Some might argue that richer people or corporations should shoulder a larger tax burden, hence a VAT increase would not be an ideal method to increase taxation. However the Irish government need to show Europe that they are acting, and a VAT increase will quickly raise additional tax revenues to help repay debt.

The Euro debt crisis is still weighing heavily on the fortunes of Europe, and investors are looking to countries like Ireland and Greece to make sure they are fiscally stable.

Article by LoansIreland.

Image by Images_of_Money @ Flickr.

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