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    Noonan admits: Plans for VAT hike didn’t consider drop in demand

    Started by matty11111| 2591 posts

    MINISTER FOR FINANCE Michael Noonan has admitted that his proposal to raise VAT by two per cent in the forthcoming Budget – which will raise VAT from 21 to 23 per cent – did not account for any impact on consumer demand.

    In response to a parliamentary question tabled by Fianna Fáil’s finance spokesman Michael McGrath, Noonan said his estimates – which said the proposal could raise an extra €670m – did not allow for the fact that it could lead to lower sales.

    Details of the VAT proposal first emerged last week when news broke of secret Budget proposals being circulated to German MPs – documents which have since been released by the Department of Finance.

    Those plans outlined how the government wanted to bring forward the 1 per cent increases already agreed for 2013 and 2014 – instead bringing in both in time for 2012, as part of its plans to raise €1.6bn in new taxes.

    McGrath said Noonan’s declaration was “quite incredible”.

    “If you speak with retailers in any town, village or city in Ireland, they will tell you that a 2 per cent increase in VAT will lead to less consumer demand.

    “In the border county areas, retailers are adamant the VAT increase will encourage more consumers to shop across the border,” he said.

    The government has insisted that the decision has not been finalised, and is merely a proposal that will be taken to the cabinet before a final decision is made.

    The last time Ireland raised its top level of VAT – from 21 per cent to 21.5 – was in October 2008, a move which then-minister Brian Lenihan later lamented as a “serious mistake”.

    That increase had coincided with a 2.5 per cent decrease in the top level of VAT in the United Kingdom – with Lenihan estimating that the Irish exchequer had lost around €700m as a result of the increase in cross-border shopping.

     

    http://businessetc.thejournal.ie/noonan-admits-plans-for-vat-hike-didnt-consider-drop-in-demand-288730-Nov2011/

     

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    28 Nov 2011 @ 11:59

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  • 3

    matty11111| 2591 posts

    This, combined with the €3.6bn which was misplaced, does make you question the intellectual ability of the people who run this country.

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    26 Nov 2011 @ 03:22

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  • 4

    sunshyn| 9140 posts

    I'm beginning to question the wisdom of electing absentee primary school teachers to lead us through our greatest crisis since betrayal of the UK/independence {#Insert smilie}

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    26 Nov 2011 @ 04:43

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  • 5

    Aerach| 13465 posts

    I think the whole system stinks. But I do like Michael Noonan.

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    26 Nov 2011 @ 05:59

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  • 4

    redSquare| 6861 posts

    I don't know if it's possible to quantify a proposed VAT rise or reduction.

    Could they quantify the hospitality VAT rate that was reduced this year. No, but the did it with the idea that it would generate business.

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    27 Nov 2011 @ 12:57

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    sunshyn| 9140 posts

    redSquare posted

    I don't know if it's possible to quantify a proposed VAT rise or reduction.

    Could they quantify the hospitality VAT rate that was reduced this year. No, but the did it with the idea that it would generate business.

     

    They could look at what happened to the take the last time we raised it by one percent, take into account that Britain has raised theirs but we're doubling the increase? 

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    27 Nov 2011 @ 14:31

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    redSquare| 6861 posts

    sunshyn posted

    redSquare posted

    I don't know if it's possible to quantify a proposed VAT rise or reduction.

    Could they quantify the hospitality VAT rate that was reduced this year. No, but the did it with the idea that it would generate business.

    They could look at what happened to the take the last time we raised it by one percent, take into account that Britain has raised theirs but we're doubling the increase? 

    it's a different time,

    in the meantime imports have decreased,

     unemployment has increased,

    the sales of kittens* have increased ten fold

     

     

     

    *maybe, but either way economic forecasting like that is all just guess work.

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    27 Nov 2011 @ 14:37

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    sunshyn| 9140 posts

    redSquare posted

    sunshyn posted

    redSquare posted

    I don't know if it's possible to quantify a proposed VAT rise or reduction.

    Could they quantify the hospitality VAT rate that was reduced this year. No, but the did it with the idea that it would generate business.

    They could look at what happened to the take the last time we raised it by one percent, take into account that Britain has raised theirs but we're doubling the increase? 

    it's a different time,

    in the meantime imports have decreased,

     unemployment has increased,

    the sales of kittens* have increased ten fold

    *maybe, but either way economic forecasting like that is all just guess work.

     

    Yeah you're not going to get a final figure, but using a figure that's basically what we take in now + 2percent is just setting yourself up to fail. Put a x percent margin of error on it maybe.

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    27 Nov 2011 @ 14:51

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    redSquare| 6861 posts

    sunshyn posted

    redSquare posted

    sunshyn posted

    redSquare posted

    I don't know if it's possible to quantify a proposed VAT rise or reduction.

    Could they quantify the hospitality VAT rate that was reduced this year. No, but the did it with the idea that it would generate business.

    They could look at what happened to the take the last time we raised it by one percent, take into account that Britain has raised theirs but we're doubling the increase? 

    it's a different time,

    in the meantime imports have decreased,

     unemployment has increased,

    the sales of kittens* have increased ten fold

    *maybe, but either way economic forecasting like that is all just guess work.

    Yeah you're not going to get a final figure, but using a figure that's basically what we take in now + 2percent is just setting yourself up to fail. Put a x percent margin of error on it maybe.

    I think they have a general expectation that the 2% increase will result in increased revenue. They'll put some figures in the Budget, which is a work of fiction anyway.

    VAT is one of the few things that they can alter in a hope that it increases revenue in a big way. We don't have our own money or interest rates any more that they can control.

    It goes without saying that they'll increase duty on cigarettes and petrol.

    I'm sure they will look at other things but in general Finance is a conservative body.

    Reply Reply with quote

    27 Nov 2011 @ 15:05

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    sunshyn| 9140 posts

    redSquare posted

    sunshyn posted

    redSquare posted

    sunshyn posted

    redSquare posted

    I don't know if it's possible to quantify a proposed VAT rise or reduction.

    Could they quantify the hospitality VAT rate that was reduced this year. No, but the did it with the idea that it would generate business.

    They could look at what happened to the take the last time we raised it by one percent, take into account that Britain has raised theirs but we're doubling the increase? 

    it's a different time,

    in the meantime imports have decreased,

     unemployment has increased,

    the sales of kittens* have increased ten fold

    *maybe, but either way economic forecasting like that is all just guess work.

    Yeah you're not going to get a final figure, but using a figure that's basically what we take in now + 2percent is just setting yourself up to fail. Put a x percent margin of error on it maybe.

    I think they have a general expectation that the 2% increase will result in increased revenue. They'll put some figures in the Budget, which is a work of fiction anyway.

    VAT is one of the few things that they can alter in a hope that it increases revenue in a big way. We don't have our own money or interest rates any more that they can control.

    It goes without saying that they'll increase duty on cigarettes and petrol.

    I'm sure they will look at other things but in general Finance is a conservative body.

     

    I dunno, there's a big argument that increasing duty on fags will increase the smuggling going on and make a loss. I was walking down Moore Street the other day and for the first time since I was a kid they were selling tobacco openly. And tax on drink will be a big imperative to drive people over the border, especially at Christmas. 

    To be honest I don't buy the line that they're totally restricted by outside forces, Croke Park is something they've elected to carry on with and so public and civil servants on high wages continue to hide behind the lower paid PS people - they've imposed the biggest budget restriction on themselves. 

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    27 Nov 2011 @ 15:18

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  • 3

    Bebs| 4795 posts

    At the most recent FTMTA conference the word being spread by a knowledgeable attendee at the conference was that the Irish government had been informed that the British government would be raising their rate VAT by 2.5%.

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    27 Nov 2011 @ 17:19

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    NotHappyJan| 4374 posts

    Personally I'm a bit disappointed by Noonans very obvious mistake. It was the first thing that came into my head, especially after the disastrous .5% rise to 21.5% a few years back. 

    I really do like Noonan, and I know the budget is going to be tough, but even after this mistake I still trust him more than anyone in Fianna Fail to do the right thing. 

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    28 Nov 2011 @ 11:59

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