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Lenihan’s admission on VAT welcome but does not go far enough

16 March, 2009

Sinn Féin Vice President Mary Lou McDonald MEP has today welcomed Finance Minister Brian Lenihan admission that increasing the VAT rate last October was a mistake addin, “in advance of the governments October budget Sinn Féin called for a modest reduction in VAT in our pre budget submission. We argued that a reduction in VAT would boost the incomes of low and middle income earning families and would stimulate consumer spending. Minister Lenihan’s admission of error is welcome however the government’s failure to tackle the perpetual negative impact of the VAT differential on the island has not been acknowledged, and retailers, particularly along the border counties are paying a heavy price.”

The Dublin MEP said:

“Unprecedented times call for unprecedented measures. We need political and indeed business leaders to deliver innovative solutions to regain economic prosperity for the entire island.

“The problem caused by two competing taxation regimes on the island has been an ongoing problem for retailers and service providers.  In the current economic climate and with the sterling/euro exchange rate the problem has been exasperated. Border county SMEs are taking the hardest hit and the potential jobs losses for the retail sector in the south is set to run into tens of thousands.

“Immediate steps should include a reversal of governments half percent increase in VAT. Retail outlets need to equalise the sterling euro currency differential and the government must put sufficient pressure on retailers to pass on these savings to consumers in the south. Large food retailers must also pass on savings made from purchasing stock in the north and Britain.

“However the governments longer term strategy must be the harmonising of taxation north and south. The existence of two taxation regimes on a small island simply does not make sense. This approach by both the Irish and British governments fosters economic distortions across the island and deepens the economic instability and social deprivation experienced in border counties as a result of partition.” ENDS

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