The rise in the UK rate of VAT will stimulate the economy of this State and will create jobs, Minister for Enterprise Batt O’Keeffe said.
Mr O’Keeffe said this decision, coupled with the decline in value of the euro against the sterling pound, would be the effect of the British government’s decision today.
“The move will increase consumer demand and generate retail sales at a time when we need every possible support to create jobs and build for economic recovery,” he said.
“The increased VAT rate in the UK, allied with falling value of the euro against the pound sterling, will discourage cross-border shopping and incentivise more of our consumers to spend their money in this jurisdiction.”
Mr O’Keeffe said the move would “severely curtail” the loss in revenue to our economy as a result of cross-Border shopping, which was estimated to be worth up to €600 million.
“It also has very positive implications for our exports and our Exchequer taxation receipts.”
Fine Gael spokesman on North-South cooperation Joe McHugh said Border retailers here would welcome the increase in the UK VAT rate from 17.5 per cent to 20 per cent next January.
“This may re-balance trade between the Republic of Ireland and Northern Ireland. But hoping that the euro stays weak against the British pound should not be a Government policy,” Mr McHugh said.
“Last Thursday Minister for Finance Brian Lenihan admitted that he did not meet with British chancellor George Osborne or with NI minister for finance Sammy Wilson in the context of this British budget," he said. “The Government has no plan for Border trade or for all-island commerce.”
Mr McHugh said the governments must work together to help businesses through fiscal and monetary adjustment processes.
Green Party enterprise spokesman Senator Mark Dearey said the increase in VAT would bring the Republic closer to price parity with Northern Ireland.
The Louth-based businessman he intended to continue to lobby Mr Lenihan to initiate along with the UK Treasury, a new cross-Border development zone along the Dundalk-Newry corridor.
“While currency fluctuations introduce an unwelcome variable, many of the asymmetries that existed this time last year have disappeared creating a more stable environment for investment for business planning and for job creation," he said.