Irish Budget 2011: An international VAT compliance firm said on Monday that
the corporation tax rate of 12.5% protected, a rise in the standard or top rate
of VAT to 23% is likely in the December 2010 Budget. Meanwhile, an economist is
expected to call today for a single rate of VAT at a budget conference organised
by the Economic and Social Research Institute (ESRI).
Ireland has both
zero, 13.5% and 21% rates.
VAT Services said on Monday that following the UK’s
announced 2.5% VAT increase to 20%, from January 2011, the Minister for Finance
Brian Lenihan will have flexibility to raise the top Irish VAT rate by as much
TMF said a
common European strategy to pay for low business taxes (payroll and corporation
taxes) has been to raise consumption taxes such as VAT. Ireland attempted this
at the outset of the financial crisis with a 0.5% increase in VAT to 21.5% in
October 2008. However, due to a sharp drop in trade as shoppers crossed the
border to Northern Ireland to take advantage of the 17.5% rate and then 15% VAT
rate - - introduced by Gordon Brown government as a temporary stimulus - -
the Irish government was compelled to reduce the rate back to 21% in January
ESRI Budget Conference
UCD economist, Joe Durkan,
will say at the ESRI conference today that the tax system is heavily
geared to goods with a high income elasticity (e.g. cars) with exclusions for
many goods and services (e.g. food). A standard VAT rate applied across the
board would have the effect of reducing the variability of indirect receipts
when demand falls or weakens.
Durkan will say that there
are more useful redistributive measures than have a zero or low rate of VAT.
ESRI conference papers (one pdf file)