North To Benefit As Irish VAT Set For Hike

Tax increases are expected to sweep into an already wintry Irish Republic today as the Dáil Finance Minister announces details of what is expected to be a €1.6bn tax increase and other extra charges in his second budget speech.

However it could lead to more Irish people travelling to the North for their festive shopping - bringing a much-needed boost to cross-border retail trade.

Minister Michael Noonan will brief the Irish parliament later today after Monday's spending cuts of €1bn were revealed.

It has been anticipated that income tax rates will today be left untouched, but the top rate of VAT will rise from 21% to 23% in a move that the Irish government estimates will bring in €670m euros, but bring more cross-border shopping in its wake.

Mr Noonan is scheduled to begin his speech at 3.45pm in the Dáil chamber and as well as higher VAT rate he is also set to increase fuel duty, motor tax and new levies for employees holding property or stock investments.

Other rumoured measures include an increase in the tax on savings, the implementation of a €100 household charge, the broadening of PRSI to cover rental income and an increase to the carbon tax on petrol, diesel and home heating oil.

The Government hopes to collect an extra €1.6 billion in tax revenues next year, with some €0.6 billion of the figure coming through the implementation of measures arising from Brian Lenihan's budget last year over a full 12 month period.

Mr Noonan's Cabinet colleague, Minister for Public Expenditure and Reform Brendan Howlin yesterday unveiled cuts of €1.4 billion across a range of State services. This followed a €755 million cut to proposed capital spending projects.

However, Enterprise Minister Richard Bruton also sweetened the pill and announced that his Department's budget will be broadly maintained in 2012, with current spending at €366m slightly lower than its 2011 allocation but capital spending at a record high of €514m.

The Government will commit approximately €1bn in enterprise capital supports, he promised.

Some of the provisions in the capital budget for 2012 included a 4% increase in the Enterprise Ireland capital budget, maintenance of the IDA capital budget, maintenance of the County Enterprise Boards' capital budget, a 10% increase in the number of high potential start-up Irish companies supported and €18m spend on Innovation Fund Ireland to further improve the Irish venture capital industry.

The Minister said: "This Government is determined that, alongside the very painful budgetary decisions we have to make, we must implement our plan for economic recovery and job creation

"That is why, at a time of declining resources, the Enterprise budget is being broadly protected. Of course my Department, like all others, will find savings across its current expenditure, including in administration and pay budgets.

"However crucially, as previously announced, capital spending on job-creating programmes will be increased in 2012. This will mean that my Department and its agencies will be able to continue current levels of spending on job-creation, as well as increasing the scope of some crucial programmes and implementing some new measures," he said.

See: Severe Budget Targets Public Spending

(BMcC/GK)