A small cut in VAT and a reduction of the excise duty on wine, beer and spirits is unlikely to improve the mood of Irish consumers this evening as they digest what has been described as the harshest budget in living memory.
VAT rates are to be reduced by half a point to 21 per cent from January while excise duty on a pint of beer or cider falls by 12 cent, a measure of spirits by 14 cent and a bottle of wine by 16 cent per bottle.
The Minister warned publicans if the cuts were not passed on to consumers immediately he would reverse them.
Another small piece of good news for some consumers came in the form of a price freeze on a packet of cigarettes which Mr Lenihan said was implemented due to concerns that a further tax increases would increase the level of tobacco smuggling into the State.
Expressing his dismay at the failure to increase the price of cigarettes, the medical Director of the Irish Heart Foundation Dr Brian Maurer said it was well proven that price was "the most effective deterrent to young people taking up smoking and to encourage existing smokers to quit".
He said a "significant increase in tobacco tax was sorely needed in this budget” added that the Foundation felt “badly let down by the Government’s decision to do nothing.
The Irish Cancer Society echoed Dr Maurer’s criticisms and said it was the Government’s inaction on tobacco smuggling which has "not only undermined its own revenue base, but has also allowed Ireland to become the easy target of smugglers, who are specifically targeting young people with cheap and illegal cigarettes.”
The Minister also announced a 50 cent charge for every medical card prescription from April. The Irish Pharmacy Union, which represents 1,800 pharmacists warned that the charges for medical card holders could lead to certain patients no longer taking essential medicines and, as a result, requiring hospitalisation.
“It is ironic that when prescription charges are being phased out in other jurisdictions, Ireland is introducing them, “ IPU President, Liz Hoctor said. “Pharmacists understand the need to tackle medicines wastage, however, there are better ways to deal with this issue, which the Union has been advocating for years. These alternative proposals would not place patients’ health at risk.”
A carbon tax of €15 per tonne is to be introduced, with the price of petrol and diesel rising from midnight. The tax will be imposed on home heating oil, coal and peat from May of next year.
The changes will lead to increase of an estimated 39 cent for a bale of peat briquettes and €1.79 for a 40kg bag of coal. The latest study from the ESRI estimates the changes will cost households an average of between €2 and €3 per week, or up to €156 per year.
The minister said that €50 million of this tax yield will be used to help those at risk of fuel poverty.
