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Nov, 2011

The Government is planning to reduce the universal social charge (USC) for the lower-paid in the forthcoming December 6 Budget and to find ways of increasing taxes on wealthy exiles, according to The Sunday Business Post.

Meanwhile, the battle is only now heating up over last week’s confirmation of a proposal for the 2% rise in the top rate of Vat with the Economic and Social Research Institute publishing analysis showing it will hit the poorest most.

The Sunday Independent says retailers and restaurant owners are warning the ‘suicidal’ rise in Vat will cost jobs and will not raise the €670m projected.

“Obviously the finance minister has never heard of price elasticity. When prices go up, people buy less. This Vat increase is a killing blow,” Dave Fitzsimons of Retail Excellence Ireland told the newspaper.

This view is echoed by Declan Ronayne, managing director of DSG (Currys and PC World) who says retailers have been caught on the hop by the upfront Vat increase, rather than the previously anticipated 1% a year phased in over the next two years.

“Vat is the tax that is in the most trouble and the solution is to lash it up? It is absolutely barmy. People will go north,” he said.

The rise will leave the top rate of Vat 3% higher than in Northern Ireland and the UK. It will affect a wide range of goods including alcohol, petrol and diesel, detergents, toys, white goods, CDs and DVDs, furniture, tools and car parts.

This differential is the main aspect of the hike exercising traders in border areas, The Sunday Business Post reports.

“If this (2% increase) is introduced in a single shot, it will have a disastrous impact on retailers as well as on the spending power of the people of the region,” said Paddy Malone, president of the Dundalk Chamber of Commerce. “This is the first Christmas in years that Dundalk will compete with Newry on an equal footing … Economics, at its heart, isn’t about numbers, it’s about the people on the ground, and the government needs to realise that. The psychological message that a move like this sends out means Dundalk is going to lose out, big time. It bolsters the perception that Newry is cheap.”

Meanwhile, back in the Sindo, Fitzsimons does not believe the government will enact the increase until after Christmas at the earliest – but given the surprise of last week’s up-front announcement he is now wondering whether to expect the unexpected.

“The minister couldn’t increase it on Budget night, could he? That would actually cancel Christmas for the retail sector,” he said.

Still, it’s an ill wind. Both newspapers report an expected surge in big-ticket consumer items over the next few weeks ahead of the planned increase.

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