Finance Minister admits to assumption that spending levels won’t be hit by VAT increase
Opposition label Noonan comments as ‘quite incredible’
Ireland’s Finance Minister has admitted that his decision to increase the VAT rate was taken without any recognition of the fact that people may spend less when it is implemented.
Michael Noonan has publicly acknowledged that his claim that a two percent increase in the top VAT rate to 23 percent would generate one billion dollars in extra revenue is based on an assumption that public spending patterns remain unchanged.
In reality, every other VAT increase in Irish budgetary history has resulted in a drop in public spending with some revenue lost to cross border shopping.
Analysts now say that Noonan’s projections may be "hopelessly" optimistic after previous Ministers only saw an increase in revenue when they decreased the top VAT rate.
Ireland’s top ten most popular tourist attractions for 2011 - PHOTOS
When the late Brian Lenihan increased VAT rates to 21.5 percent, total VAT receipts fell 21 percent.
Noonan’s declaration that his estimates assume spending remain at current levels has astounded opposition parties.
The Finance Minister, responding to Fianna Fail spokesman Michael McGrath, admitted in the Irish parliament that the estimate of the yield from a two percent increase took no account of the reduced consumer demand that may arise.
The Minister said: “I am informed by the Revenue Commissioners that the revenue that would be raised from a two percent increase in the standard rate of VAT is estimated at €670m in a full year.
“This estimate does not take into account any behavioural change on the part of taxpayers as a consequence of such a measure.”
McGrath has labelled Noonan’s admission as “quite incredible."
The Fianna Fail spokesman on Finance said: “If you speak with retailers in any town, village or city in Ireland, they will tell you that a two percent increase in VAT will lead to less consumer demand.
“In the border counties, retailers are adamant that the VAT increase will encourage more consumers to shop across the Border. It will depress consumer demand and cost jobs.”
- Gay wedding cakes latest target of anti-gay...
- Racist incidents in Ireland up by 85 percent...
- An open letter in strong defence of capitalism.
- A Magdalene Laundry US adoptee who holds...
- Irish radio presenter suspended after anti-Isra
- Nelson Mandela was against IRA decommissioning.
- Families as well as Catholic Church and governm
- Baby dies in horror birth at Belfast hospital...
- Gay teacher fired from Catholic school after...
- Sarah Palin is saving Christmas
You should hear in the USA the right wng extremists calling Nelson Mandela all kinds of names and insults...........Why because he is black. These riVirginia governor slammed by doctor over plain cigarette pack rejection
YOur welcome to smoke - and take a decade off you life from lung cancer, throat cancer, nicotine scaring the arteries which provides places where plaAn open letter in strong defence of capitalism to Pope Francis
I'm not caht but he's a great guy, especially compared to his past extremist right wing German pope As for capitalism, in the USA, the gap between thGay wedding cakes latest target of anti-gay bigots
I've dealt with these kind of people, typically evangelists / southern baptists /born agains To put it simply they believe that every word in the bib