05March2024

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Impact of the Decision To Leave the EU

Impact of the Decision To Leave the EU

It is now clear that the British people have made the choice to leave the European Union. The countr...


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Hardware Retailers Concerned Over Proposed VAT Increases

The Irish Hardware & Building Materials Association, IHBMA, have written to Minister for Finance Michael Noonan regarding his comments and press reports of an increase by the Government in VAT by 2 % in the December budget.

The IHBMA strongly believe that this would be very detrimental and deal a fatal blow to any upturn and follow-on recruitment and retained of employment in the retail Hardware , Building Materials and DIY sector.

The Association argue that an increase is a major mistake recognised by the previous Minister for Finance Brian Lenihan only after the damage was done to the retail sector. In fact a reduction in the rate of VAT is what is called for to stimulate spending . CEO Jim Copeland say`s that ‘You simply can't arrest a falling tax take by increasing the rate of that tax’. For consumers, a lower rate of VAT would give them a great opportunity to return to spending even in a cautious and considered way given the negative consumer sentiment that still currently exists. As VAT is a tax on spending not income, consumers would feel encouraged by a reduction of VAT.

For businesses, however, it would be a welcome boost especially as they face into a new year of continued austerity and much reduced disposable income. They would be willing to address and accept the administrative cost and inconvenience of the variation to the standard rate.These costs include software revisions, employment related expenditure and general overheads.

Of course, from a Government and tax perspective, The Department of Finance still needs to try to balance its books and any decrease in the take from one tax must be countered by an increase in receipts from another tax. However, the theory is that a decrease in VAT will lead to a higher VAT yield as consumers will have more confidence and consequently spend more – albeit that the consumer is currently suffering with less cash to spend!

CEO Jim Copeland asks that the Minister rethink his options as it would be very easy to kill off any signs of a recovery in consumer sentiment and demand.

Retailers do understand the need to balance the national books. However, raising VAT by 2% will lose all the recent gains we’ve made in competitiveness. We need to incentivise consumers to spend , as the Minister himself has already promoted during the year , and not to further alienate and disincentivise their spending.