I move Financial Resolution No. 5:
(1) THAT the rate of value-added tax on the supply of certain goods and services at present chargeable at the rate of 20 per cent be increased to 21 per cent of the amount on which tax is chargeable in relation to the supply of such goods and services, and that, accordingly, subsection (1) (inserted by the Finance Act, 1992 (No. 9 of 1992)) of section 11 of the Value-Added Tax Act, 1972 (No. 22 of 1972), be amended by substituting in paragraph (a) "21 per cent" for "20 per cent" (inserted by the Finance Act, 2001 (No. 7 of 2001)).
(2) THAT this Resolution shall have effect as on and from 1 March 2002.
(3) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).
An increase from 20% to 21% on the supply of all 20% rated goods and services will come into effect from 1 March 2002. The change in the standard rate will apply to all goods and services which are currently rated at 20% which is the standard rate. This includes items subject to excise, such as petrol and tobacco.
VAT is remitted by traders to the State on a two-monthly basis: January-February, March-April, and so on. In any one year there are six VAT periods. Obviously, the most suitable date for making the change is at the beginning of a VAT period.
Because of the changeover to the euro and the difficulties which will result in the January-February period, this increase is not being levelled until 1 March, the beginning of the second two month period. VAT for the last two month period, November-December does not fall to be collected until 2003.
The increase in the rate will yield 194 million in 2002 and 290 million in a full year. The increase in the standard rate will add approximately 0.4% to the consumer price index. This is being done to raise revenue which the Government needed. It is being done at a time when consumption is strong. Clearly it does not affect exports or inter-business or inter-company trading. It will have a minor effect on the consumer price index in 2002.