Dáil Éireann Debate, Wednesday - 22 April 2009
225 Deputy Joan Burton asked the Minister for Finance the reason, in view of the fact that he admitted shortly before the 7 April 2009 budget that the 0.5% increase in the VAT rate in October 2008 had been a failure, he did not take the opportunity in the supplementary budget to reverse this measure; and if he will make a statement on the matter. [15909/09]
Amharc ar fhreagraAs the Deputy is aware, the 0.5% increase in the standard VAT rate from 21% to 21.5% was introduced in the 2009 Budget as part of a general package of revenue-raising measures to fund key public services. The UK Government, as part of a fiscal stimulus package, then reduced their standard VAT rate from 17.5% to 15% on a temporary basis with effect from 1 December 2008 to 31 December 2009.
It would appear that the timing of Ireland's VAT increase, given the subsequent temporary reduction in the UK rate, may have sent the wrong signal to consumers. However, given the current Exchequer deficit position, the Budget 2009 policy decision of increasing the VAT rate continues to be necessary in order to support the public finances.
We are borrowing to fund day to day public services which is unsustainable as future generations will be required to pay higher taxes unless we correct our public finances. As a small open economy, many of our standard rated goods are imported, and cutting the VAT rate could benefit the economies from which we import more than our own. In other words, while, it might help the consumer, it would not be the most effective way of helping our own economy.
