why did the government raise VAT

Drawing Dead

i'm confused on this because the uk was faced with the same economic downturn as us but it did the opposite to what our economic brains did.

lotusflower

I think the only answer to this is it's Ireland

cson

Short term thinking because they needed to raise cash to pay to run the country, short term again. It was an easy target but it's backfired on them. I don't have figures but I'd imagine VAT takes are significantly down from last years. I do however think they have the sense to realise this and will reduce it in the budget. Hopefully.

gcgirl

because in Ireland they put the cart in front of the horse! they should drop vat and compete with the north just like any rival business would do!! make them wanna shop in the south!

Drawing Dead

cson wrote: »

I do however think they have the sense to realise this and will reduce it in the budget. Hopefully.

the sunday times budget prediction said it'd be changed to 15% on wednesday.

so it was just short term thinking?

cson

Drawing Dead wrote: »

the sunday times budget prediction said it'd be changed to 15% on wednesday.

so it was just short term thinking?

I highly doubt it'll be reduced by 6.5% in one shot but I'd imagine it'll be brought to a level 20% if it is to be reduced. It was more reactionary thinking - the budget at the time was hugely troubling given the basic fact the cost of running the country was going to have to be borrowed for the most part. So in an attempt to raise revenue they went for an easy option in attacking VAT. Obviously it backfired on them.

seclachi

cson wrote: »

I highly doubt it'll be reduced by 6.5% in one shot but I'd imagine it'll be brought to a level 20% if it is to be reduced. It was more reactionary thinking - the budget at the time was hugely troubling given the basic fact the cost of running the country was going to have to be borrowed for the most part. So in an attempt to raise revenue they went for an easy option in attacking VAT. Obviously it backfired on them.

Question is, how many more idiotic get rich quick schemes are the government going to subject us to, we have already had one in the form of them pissing off the unions with there oh so cunning plan that will let them cut there pay but will probably kill any hope of easy reform.

lmimmfn

Drawing Dead wrote: »

the sunday times budget prediction said it'd be changed to 15% on wednesday.

so it was just short term thinking?

The sunday times article wasnt a prediction it was more of a 'what could be done'.

They'll need to reduce it, they've priced themselves out of the market on booze and cigs.

Apparently 500million was spent up north this year, and the years not over yet, say its 650million with christmas shopping, with VAT at 22% that take would be 143million lost, however thats only the start of it, if you work out the total from those goods being imported, tax paid on haulage for the goods etc. its probably upwards of 350-400 million lost.

Drawing Dead

but assuming the uk model is working well -
(and i have no idea if it is or isn't, just that people keep sayng our prices need to be competitive)
- why don't we do the same as them and reduce our VAT to stimulate spending in our economy?

cson

Drawing Dead wrote: »

but assuming the uk model is working well -
(and i have no idea if it is or isn't, just that people keep sayng our prices need to be competitive)
- why don't we do the same as them and reduce our VAT to stimulate spending in our economy?

A simple answer to that is currency. Being part of the euro, we couldn't survive doing that. Having Sterling, the UK can.

lmimmfn

cson wrote: »

A simple answer to that is currency. Being part of the euro, we couldn't survive doing that. Having Sterling, the UK can.

yes we could, last i checked cigs we'rent 8.50EUR in other european countries and the min price of any semi ok bottle of wine isint 7-8euro, both items of which i buy in bulk when i go up north, i'd have 0 problem buying them here if the prices we're any way similar.

Drawing Dead

cson wrote: »

A simple answer to that is currency. Being part of the euro, we couldn't survive doing that. Having Sterling, the UK can.

what do you mean by that?

bijapos

First of all, if VAT is reduced, will this be passed on to the consumer in all cases or will the retailer simply pocket the difference. e.g. Product costs €1.99, VAT at present is 21.5%, so if VAT is reduced to say 17% is the retailer going to drop the price to €1.90 or keep it at €1.99 and pocket the difference, my money is on the latter in a lot of cases. Best example of this is when the big retailers put pressure on veg growers to reduce their price they didn't always pass this on. Ironically IBEC said it was their right NOT to pass this difference on.


Secondly, a lot of people go north to shop for alcohol. VAT is not the only tax on alcohol, and even if you take all possible taxes off a bottle of beer sold here and up the north, the base price here is a lot more. In other words we are being ripped off.

Thirdly, prices are skewed wrongly at the moment because of the currency difference, was £1 - €1.50, now its usually around €1.10. This is out of our control and something we have to suffer for the meantime.

Fourth. The main retailers don't give a damn where we shop, same difference if we shop in Dunnes in Dublin or Newry, cash/profit ends up in the same company bank a/c at the end of the day. If this means they can squeeze a bit more from the poor sods who cant drive north to do thei shopping every week, then all the better for them. Do you see them complaining?

I feel that wit han introduction of a carbon tax (which is something all parties are in favour of) they should drop the VAT rate as a concession. This remains to be seen.

lmimmfn

bijapos wrote: »

First of all, if VAT is reduced, will this be passed on to the consumer in all cases or will the retailer simply pocket the difference. e.g. Product costs €1.99, VAT at present is 21.5%, so if VAT is reduced to say 17% is the retailer going to drop the price to €1.90 or keep it at €1.99 and pocket the difference, my money is on the latter in a lot of cases. Best example of this is when the big retailers put pressure on veg growers to reduce their price they didn't always pass this on. Ironically IBEC said it was their right NOT to pass this difference on.


Secondly, a lot of people go north to shop for alcohol. VAT is not the only tax on alcohol, and even if you take all possible taxes off a bottle of beer sold here and up the north, the base price here is a lot more. In other words we are being ripped off.

Thirdly, prices are skewed wrongly at the moment because of the currency difference, was £1 - €1.50, now its usually around €1.10. This is out of our control and something we have to suffer for the meantime.

Fourth. The main retailers don't give a damn where we shop, same difference if we shop in Dunnes in Dublin or Newry, cash/profit ends up in the same company bank a/c at the end of the day. If this means they can squeeze a bit more from the poor sods who cant drive north to do thei shopping every week, then all the better for them. Do you see them complaining?

I feel that wit han introduction of a carbon tax (which is something all parties are in favour of) they should drop the VAT rate as a concession. This remains to be seen.

yep, we're being ripped off bigtime down here, thats why its very important to not shop in any of the retail stores up north that exist down here like Dunnes or Tesco's, stick to Sainsburys or whatever as that will mean a complete loss of sales for Dunnes & Tescos.

cson

Drawing Dead wrote: »

what do you mean by that?

Again, to put it simply; they can devalue their currency to pay for a VAT decrease, we cannot.

ardmacha

The UK government hasn't really started on the tax increases needed to address their deficit. One belief is that they will have to make VAT there 20%. The Irish government can then bring in a boradly based property tax (already in UK) and reduce VAT to 18%, then traffic in Newry will return to normal.

http://www.guardian.co.uk/business/2009/nov/08/high-street-retail-vat-20

nesf

gcgirl wrote: »

because in Ireland they put the cart in front of the horse! they should drop vat and compete with the north just like any rival business would do!! make them wanna shop in the south!

Eh, VAT is only a very small part of the price difference between North and South. Most of it comes from the weak Sterling and the wage levels of workers in the North being so much cheaper because of this. So long as Sterling is weak we'll have the Newry problem and there's very little that the Government can do about it.

thebman

Drawing Dead wrote: »

i'm confused on this because the uk was faced with the same economic downturn as us but it did the opposite to what our economic brains did.

For the exact same reason Irish publicans raise prices when less people turn up to drink in their pubs/nightclubs.

Crap less people are coming in the door so we are making less money, better raise prices to restore our profits to previous levels. Repeat as necessary.

It just seems to be how many Irish businessmen think. It is also not very intelligent to not even look at why less people are coming in the door. In Ireland's case, the government were left asking people to shop down south to help the country when they were doing half their business with the UK and prices were ridiculously cheaper up north on some items.

Eliot Rosewater

bijapos wrote: »

First of all, if VAT is reduced, will this be passed on to the consumer in all cases or will the retailer simply pocket the difference

Elementary economics would seem to say that the tax reduction would be split between the retailer (higher revenue) and the shopper (lower price). If VAT is reduced retailers will pocket the difference until such a time as one retailer says "hey, we can afford to reduce our price and undercut our competitors!" This would probably happen quickly, if not instantly. Its to do with market equilibrium, although admittedly Ive only studied it at the most simplistic level. In modeling the €10 travel tax, it was seen that it was split roughly evenly between the airline and the passenger, if I rightly recall.

Low Energy Eng

lotusflower wrote: »

I think the only answer to this is it's Ireland

I was travelling back and forth to the UK alot for the past 2 years. In their papers the UK government regretted reducing VAT as it had absolutely no effect on consumer spending.

So, the Irish government regretted increasing the VAT rate...

In hindsight, the Irish probably forgot it ever happened and the defecit has been slightly reduced.
The British government are down in tax incomme and may increase there taxes during their next budget. If this was to happen I'd imagine there are British people complaining sayin "its Britain".
I think the fact we're part of Europe and the only way we can actually tackle this problem is by reducing ublic wages etc is the quicker & healthier way for the country to get back to proper sustainable growth

irish_bob

nesf wrote: »

Eh, VAT is only a very small part of the price difference between North and South. Most of it comes from the weak Sterling and the wage levels of workers in the North being so much cheaper because of this. So long as Sterling is weak we'll have the Newry problem and there's very little that the Government can do about it.

add to that the cost of energy ( thank you average 75k wage in the ESB) and the fact that local authority rates have actually gone up , it isnt really a level playing field between north and south

personally speaking , shopping up north is not something i would do unless i was facing abject poverty , i think its short sighted in the extreme and i think anyone who does it has no business complaining about cuts in child benefit etc , sorry

thebman

Low Energy Eng wrote: »

sing the VAT rate...

In hindsight, the Irish probably forgot it ever happened and the defecit has been slightly reduced.
The British government are down in tax incomme and may increase there taxes during their next budget. If this was to happen I'd imagine there are British people complaining sayin "its Britain".
I think the fact we're part of Europe and the only way we can actually tackle this problem is by reducing ublic wages etc is the quicker & healthier way for the country to get back to proper sustainable growth

Eh the Irish certainly didn't forget it happened. Many shop up north and more again are buying online to escape the vat rate in Ireland particularly on electronic goods.

masteroftherealm

thebman wrote: »

For the exact same reason Irish publicans raise prices when less people turn up to drink in their pubs/nightclubs.

Crap less people are coming in the door so we are making less money, better raise prices to restore our profits to previous levels. Repeat as necessary.

It just seems to be how many Irish businessmen think. It is also not very intelligent to not even look at why less people are coming in the door. In Ireland's case, the government were left asking people to shop down south to help the country when they were doing half their business with the UK and prices were ridiculously cheaper up north on some items.

Ver true, many companies have done this CIE etc some of the bggest followers of this theroy.
Were losing money!! No Passengers!! Oh I know what we'll do we'll jack up the prices so that we have even less customers.

Ireland = Economics 101 Failure

Low Energy Eng

thebman wrote: »

Eh the Irish certainly didn't forget it happened. Many shop up north and more again are buying online to escape the vat rate in Ireland particularly on electronic goods.

The matter hasnt crossed my mind since it really happened. Buying online and up North is something that would happen whether the VAT rates changed or not. Especially during the recession.

ninty9er

I have very little doubt in my mind that no revenue was lost because of the .5% VAT increase, meaning the .5% increase achieved broadly what it set out to do, that is lessen the effect of a collapse in consumer confidence.

However in the UK the same cannot be said of the 2.5% drop in VAT, as it had nowhere near the desired revenue generating effect, and as such will be undone in January when Alastair Darling gets to give his first budget.

I know it won't technically be his first, but much like Cowen, good ol Gordo will now have to do as his money man tells him if he wants to keep his government afloat, which leads me to believe the UK is going to see even more savage cuts than we are having.

The budgetary cycle is being bounced around there, whereas, hard as it may be to believe, a gradual return to revenue neutral budgets here will put us in a position to see significant differences in the tax take when it is raised at most levels in Budget 2011, whereas this budget aims to reduce costs so that the revenue generated in future will not be cannibalised by a bloated civil service and unrealistic public expectations of a low tax economy.

Dannyboy83

lmimmfn wrote: »

The sunday times article wasnt a prediction it was more of a 'what could be done'.

They'll need to reduce it, they've priced themselves out of the market on booze and cigs.

Apparently 500million was spent up north this year, and the years not over yet, say its 650million with christmas shopping, with VAT at 22% that take would be 143million lost, however thats only the start of it, if you work out the total from those goods being imported, tax paid on haulage for the goods etc. its probably upwards of 350-400 million lost.

Thats still only half of what they've lost on cigarettes.

CIGARETTE smuggling is costing the state hundreds of millions of euro in lost levies.

The illegal trade is reaching epidemic proportions and one estimate, for the losses to the exchequer per year by the end of 2010 of excise duties and VAT, has been put at €750 million.

Read more: http://www.irishexaminer.com/ireland/snqlcwqlau/rss2/#ixzz0Z8EgwEMR

This government are out to destroy us.
If they don't drop the price, we'll have Al Capone mark 2.0

stepbar

thebman wrote: »

For the exact same reason Irish publicans raise prices when less people turn up to drink in their pubs/nightclubs.

Crap less people are coming in the door so we are making less money, better raise prices to restore our profits to previous levels. Repeat as necessary.

It just seems to be how many Irish businessmen think. It is also not very intelligent to not even look at why less people are coming in the door. In Ireland's case, the government were left asking people to shop down south to help the country when they were doing half their business with the UK and prices were ridiculously cheaper up north on some items.

A lovely article in the SBP illustrating the profit made in some establishments in town - http://www.sbpost.ie/news/ireland/dublin-hotel-makes-75m-profit-46106.html. But then again the fiqures illustrated are A) a year behind and only a point of time analysis. I'd hazard a guess that both places will still manage to make a profit in 09', abeit a smaller one.

How ever what it does illustrate is that during the Celtic Tiger years we over paid for everything and accepted it willingly.

skearon

Drawing Dead wrote: »

i'm confused on this because the uk was faced with the same economic downturn as us but it did the opposite to what our economic brains did.

It was raised by a mere 0.5%, so unless you're buying a €100,000 Range Rover its not noticeable

The UK drop from 17.5% to 15% was a failure, prices didn't decrease and its going back to 17.5% from January 1st

Absurdum

irish_bob wrote: »

add to that the cost of energy ( thank you average 75k wage in the ESB)

Wages account for about 15% of ESB's expenditure, the cost of energy is set by the regulator, plus they have several competitors if customers aren't happy. It's been covered here many times before.

doc_17

Why did they raise VAT? Because they haven't got a clue, that's why

lmimmfn

Dannyboy83 wrote: »

Thats still only half of what they've lost on cigarettes.



This government are out to destroy us.
If they don't drop the price, we'll have Al Capone mark 2.0

i know, but they've completely priced themselves out of the market, ill buy any cheapo cigs and have no problem doing so, theyre stupidly expensive and they're not expensive to make you quit they're expensive just for revenue. I generally buy loads in the north when im up. Id have no probs paying 7 euro down here if they we're that even against 4 euro chinese ones or whatever, just to support the economy, but cmon, lol, 1 pack a day x30 = ~260euro, a year = 3120euro haha, that just insane.

And no comments on 'give up' blah blah blah, not interested in hearing that and its not my point.

Johnee

Its accepted by most economists that the UK move was a complete waste of money. The UK governnment has effectively blown a lot of cash (and it doesnt have much to go around) on a badly-directed, scattergun attempt at stimulating their economy. It now doesnt have that cash to undertake more targeted stimulus measures, and its going to have to put the VAT rate back up while people still dont have a lot of cash and (as the economic data out today shows) the UK economy is still in recession and lagging way behind all other major states.

Im not saying the VAT increase here was a good idea but a VAT decrease would not have been a good plan either.

Howjoe1

because there brain dead:mad:

jackthekipper

If it does fall to 15%, then that means when people would have spend 121 in the past they would now save 6.50, is this enough to get people spending?

ninty9er

jackthekipper wrote: »

If it does fall to 15%, then that means when people would have spend 121 in the past they would now save 6.50 will still pay 121, is this enough to get people spending?but retail profits will increase by €6

Fixed that there for you.

jackthekipper

ninty9er wrote: »

Fixed that there for you.

You cynic

thebman

ninty9er wrote: »

Fixed that there for you.

Well then people will still shop up north.

I doubt it TBH, most Irish businesses have made some attempt to decrease prices over the past year but the government is blocking many cost cutting measures that businesses would like to take.

zootroid

thebman wrote: »

Well then people will still shop up north.

I doubt it TBH, most Irish businesses have made some attempt to decrease prices over the past year but the government is blocking many cost cutting measures that businesses would like to take.

Examples?

cson

skearon wrote: »

It was raised by a mere 0.5%, so unless you're buying a €100,000 Range Rover its not noticeable

The UK drop from 17.5% to 15% was a failure, prices didn't decrease and its going back to 17.5% from January 1st

jackthekipper wrote: »

You cynic

He's (Ninty9er) absolutely 100% right. The nature of retail is to pocket the VAT decrease - i.e. keep broadly the same price on the product and then keep the extra revenue for the company. It hasn't worked in the UK by all accounts and knowing the nature of Irish retail, it won't work here. As has been mentioned, the increase was negligible last year. That said, I do think in an attempt to plug the Newry leak, the Government will row back and reduce VAT tomorrow.

thebman

zootroid wrote: »

Examples?

Walk down a street. Shops have been reducing prices all over from what I can see.

I know my shopping bill has come down considerably. I don't really need to give examples, what do you want me to do, go take photos of things in the past and the present?

Tesco had a massive campaign earlier in the year and although they've since increased some prices they still had to do it in response to more people shopping at Lidl/Aldi.

Just look at the price of DVD's/games and many other luxury products too have come down in price massively this year.

nesf

zootroid wrote: »

Examples?

Latest stats from the CSO show an increase in volume in the latest quarter but a decrease in turnover for the retail sector. So shops are selling more stuff cheaper than they did previously. Can't be arsed actually getting finding the stats but was reported in the News etc.

Though honestly, anyone with any cop on has seen the drop in prices that's been happening. Compared to two years ago a Euro goes much farther.

Dannyboy83

Is that an increase in volume of sales?
or stock?

Just wondering if that accounts for theft, I had heard it was up significantly.

I do agree prices are down however. In many products.

cson

nesf wrote: »

Latest stats from the CSO show an increase in volume in the latest quarter but a decrease in turnover for the retail sector. So shops are selling more stuff cheaper than they did previously. Can't be arsed actually getting finding the stats but was reported in the News etc.

Though honestly, anyone with any cop on has seen the drop in prices that's been happening. Compared to two years ago a Euro goes much farther.

Easiest way to judge this; O'Briens Sandwich Bars are gone

cson

Dannyboy83 wrote: »

Is that an increase in volume of sales?
or stock?

Just wondering if that accounts for theft, I had heard it was up significantly.

I'm always interested in what kind of theft provisions and measures to combat it they have in the likes of Penneys especially. We all know the type of crowd they attract (and I mean no offence by that) and I'd imagine the amount of stock they lose through theft would be significant.

nesf

Dannyboy83 wrote: »

Is that an increase in volume of sales?
or stock?

Just wondering if that accounts for theft, I had heard it was up significantly.

I do agree prices are down however. In many products.

It would be volume of actual sales. I'll see if I can dig up the details.

Edit: Here you go: http://www.cso.ie/releasespublications/documents/services/current/rsi.pdf

I was slightly wrong, volume and turnover increased but volume by more in % terms. The details there are interesting.

cson

It could be roughly linked to EMH too - people don't have the same disposable income anymore so we are seeing an adjustment of the market downwards to a level where people will buy again. Deflation for want of a better word.

Dannyboy83

nesf wrote: »

It would be volume of actual sales. I'll see if I can dig up the details.

Edit: Here you go: http://www.cso.ie/releasespublications/documents/services/current/rsi.pdf

I was slightly wrong, volume and turnover increased but volume by more in % terms. The details there are interesting.

In Table 6
=========
The Baltic countries are doing very poorly, I wonder if thats because they are pegged to the Euro or because of the Russian Market & Kaliningrad.
Ireland seems to be doing reasonably well in the league tables there.

Why are some reports confidential?

Dannyboy83

cson wrote: »

It could be roughly linked to EMH too - people don't have the same disposable income anymore so we are seeing an adjustment of the market downwards to a level where people will buy again. Deflation for want of a better word.

Not something I've encountered before; if I understand it correctly, wouldn't an island nation be less efficient, in that respect?
Although I suppose it does limit choices compared to European countries too.

Drawing Dead

Drawing Dead wrote: »

why did the government raise VAT

Because they're idiots, they even said it was a mistake months later and still didn't bring it down. In my view the only way to get our economy back up and running and out of recession is to stimulate the economy by lowering VAT, rates, and various taxes across the board, not put everything up, cutbacks in pay to low income families and ones on welfare. After todays budget more people are going to go up north :rolleyes: , when will our government realise that taxing your way out of a recession does not work :mad:

Beasty

UK's rate is going back to 17.5% from 1 January. Despite comments from the politicians, I do not think the 15% rate had any material impact on the UK economy, and overall VAT receipts reduced. Many retailers did not reduce their prices and pocketed the difference themselves. I don't think 2.5% on what are largely non-essential items influenced consumer behaviour, except in NI, where the overall differential of 6.5% and weak £ encouraged more Irish shoppers to head north.

OS119

i don't think there was an issue with the 'on paper' VAT rate falling but the price paid at the till staying the same - indeed i know for myself that prices did fall by the 2.5% - it was merely that no one who feared for their livelihood was going to buy a new tv just because it was £195 instead of £200.

quite why the treasury didn't know that is beyond me...

my entire Christmas spend on VAT-able stuff might touch £700, the drop in VAT saved me little more that £17. anyone who thought i'd go out and buy a new car or build an extention to my house because i've got an extra £17 in my pocket must have been on crack!