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Border businesses need action by government on VAT differential

1 December, 2008

Sinn Féin Economic Spokesperson’s Arthur Morgan TD and Mitchel McLaughlin MLA have again today called for the harmonisation of VAT across the island of Ireland. Responding to the north’s VAT drop to 15% which comes into effect from today Deputy Morgan said “if Brian Lenihan and his Fianna Fáil colleagues had in fact a single patriotic bone in their body they would immediately create a fair playing field for small retailers across the border counties by addressing the VAT differential on the island.”

Deputy Morgan said:
 “The Irish government’s decision to increase VAT from 21% to 21.5% was a regressive measure likely to cost families up to €250 next year and put many small retail businesses along the border out of business. Chambers of Commerce across the border counties have already loudly outlined to the government how bleak their members immediate future is.

“Of course families in the south already struggling to cope with the government’s savage budget will flock to the north for cheaper shopping; the government has left them with no other choice. Workers are already struggling to cope with the governments unjust budget decisions including increased public service charges, VAT increases and other taxes such as the income levy.

“Finance Minister Brian Lenihan enjoys an annual income of approximately €250,000 so perhaps he has become so disconnected with the reality of ordinary people’s lives that he is simply incapable of managing an economy made up of low to middle income earners who work in small to medium sized businesses. Workers and businesses alike need government to show progressive fiscal stewardship if they are to weather the current economic storm. So far neither Brian Lenihan nor Brian Cowen has shown any such leadership.

“In the run up to Budget 2009 Sinn Féin called for a 2% reduction in VAT to boost the incomes of low and middle income earning families and stimulate consumer spending. This could have gone some way to address the VAT differential on the island. Families and businesses throughout Donegal, Cavan, Monaghan and Leitrim have traditionally been hardest hit by partition. But this economic and social trend has worsened recently as Donegal has seen unemployment rise by 58% over the last year and Cavan/Monaghan by 80% in the same period.

“If there was an ounce of patriotism in Finance Minister Brian Lenihan’s policy making he would immediately seek a meeting with the British Chancellor of the Exchequer Alistair Darling to begin the process of harmonising taxation on the island with VAT harmonisation as a first step. An all Ireland economy is the only affordable option.

“In the interim Brian Lenihan and the Department of Finance must urgently consult with Chambers of Commerce and other stakeholder business groups to examine in detail all options open to him to support small retailers along the border counties in the run up to Christmas and in preparation for the January sales.

Mitchel McLaughlin MLA added:
 “Whilst I have welcomed the reduction in VAT by the British Chancellor, I firmly believe that the economic success of this island is dependent on the development of the all-Ireland economy. It has never made sense for an island as small as Ireland to have two economies running in parallel thus in competition with each other.

“Today consumers and businesses in the six counties are benefiting from the British government’s decision to reduce VAT, while those in the 26 are hit with a further increase. Tomorrow the shoe could be on the other foot if the Irish government decided to reduce its VAT rate to levels below those decided by the British Chancellor of the Exchequer.

“The existence of two tax regimes on this small island is ludicrous and leads only to a volatile situation of economic distortions across the island, and indeed adds to the historic border county economic instability created by partition. While we in the North must continue to seek sufficient fiscal autonomy to manage the present economic realities, it is obvious however that the island’s future lies in all Ireland economic agenda.

Both Sinn Féin Economic Spokespersons concluded by saying:
 “The only progressive way forward for the development of this island’s economic future is for the process of an all Ireland economic framework to begin. Today Sinn Féin is calling for the harmonisation of VAT across the island as an initial step in beginning this process.” ENDS

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