Dáil Éireann Debate, Wednesday - 14 December 2011
77 Deputy Michael McGrath asked the Minister for Finance the basis of his calculation of a full-year yield of €670 million arising from the 2% increase in the standard rate of VAT; if his calculation takes account of any expected changes in consumer behaviour arising from the increase; the assumed change in the volume of sales as a result of the rate increase; and if he will make a statement on the matter. [40236/11]
View answerI refer the Deputy to my response to his question on this topic on 24 November 2011 (reference number 36891/11).
The estimated additional yield from a 2% increase in the standard rate of VAT that I announced in my recent budget speech is €560 million in 2012 or €670 million in a full year. These estimates were calculated by applying a direct increase of 2% to the expected yield from the 21% rate of VAT in 2011. They are "static" estimates in that they do not take into account any behavioural change on the part of taxpayers as a consequence of the rate change.
However, the projection for personal consumption in 2012, upon which the budget 2012 VAT forecast is primarily based, takes account of the rate change along with other factors affecting household spending (such as uncertainty and balance sheet rebuilding). The budget 2012 forecast for VAT receipts, at €9,995 million, represents a €265 million or 2.7% increase on the estimated 2011 outturn.
