Economic revival at risk if VAT reduction is reversed.
Tourism and hospitality industries likely to suffer.
Long term unemployed being neglected.
ISME, Wednesday 2nd October 2013
ISME, the Irish Small and Medium Enterprises Association, in response to the latest Live Register figures released today (Wednesday, 2nd October), warned that although figures have improved slightly, a reversal in the 9% VAT rate, as proposed by Minister Noonan, would undo the employment gains made so far and ultimately lead to a net loss for the exchequer. The Association expressed serious concern about the negative impact an increased VAT rate would have on the hospitality and services sectors and demanded that the Government commit to maintaining the 9% rate in Budget 2014.
The latest seasonally adjusted Live Register figures confirm that 414,300 people are signing on the dole, a reduction of 1,800. Long-term claimants account for 46.2% of the total, the highest percentage since the beginning of the recession, showing that the activation schemes are not working for the long term unemployed. The standardised unemployment rate has decreased slightly to 13.3%.
According to ISME Chief Executive, Mark Fielding, “The tentative revival experienced in the economy so far will be undone if Minister Noonan goes ahead with his plan to reverse the 9% VAT rate to its original 13.5%. The VAT reduction in 2011 has led to the creation of approximately 11,000 jobs and has greatly benefitted both SMEs and the exchequer. The tax revenue foregone has been lower than initially estimated, a fact that the Government must take into account when considering this decision.”
“It is clear, from the increase in employment and sales, that the 9% VAT rate has benefitted the struggling tourism, hospitality and services sectors. However, reduced consumer spend continues to be a pivotal issue for SMEs and the resultant price increases from a VAT rate reversal would delay any growth. The 9% VAT rate has been fulfilling its purpose as an economic stimulus measure, reversing this to 13.5% would be a perilous and short-sighted budgetary decision”.
The Association called on the Government to:
·Maintain the 9% VAT rate in Budget 2014.
·Overhaul the social welfare system to make it worthwhile for people to work.
·Focus on cost-competitiveness.
·Increase job-rich infrastructure investment.
·Attack the scourge of ever-increasing black-market activity.
·Address the lack of bank credit for productive SMEs.