Fianna Fáil condemns 2% VAT rise

Fianna Fáil in government would not include the 2 per cent increase in VAT in its budget, its finance spokesman has said.

Speaking at the unveiling of his party's budget submission in the Alexandra Hotel in Dublin today, Michael McGrath said the timing of the increase was wrong and it would lead to a dampening of demand and a drop in consumption. He said it was not possible for the Governement to rely on the VAT increase to raise over €600 million in revenue next year.

Fianna Fáil's 35-page document supports the Government’s overall adjustment of €3.8 billion and also agrees that the measures should be split between €2.2 billion in cuts and €1.6 billion in taxes.

The document features many of the measures that are likely to appear in next week’s budget, and it is supportive of the Government stance not to increase income taxes or reduce social welfare rates. However, it significantly differs from it in a number of respects.

The party said it does not support a VAT increase of 2 per cent in this year’s budget but said it would defer such increases to the last two years of the bailout programme. The document states it will make up the €600 million shortfall by a combination of measures.

They include equalising duty for agricultural and motor fuel (€160 million); imposing a 5 per cent levy on off-licence sales (€100 million); increasing the universal social charge by 2 per cent for incomes over €115,000 (€65 million); increasing capital acquisitions tax and capital gain tax rates to 30 per cent (€155 million); increasing Dirt tax to 30 per cent (€50 million) and increasing carbon tax by €5 per tonne (€108 million).

There are some novel suggestions among the tax measures including the introduction of a so-called fat tax on high sugar food and drink.

On the expenditure side, the party estimates that €500 million could be raised by the “accelerated implementation” of the Croke Park agreement. The party also departs from Government in relation to capital savings, opting for a €500m cut rather than €750 million.

Mr McGrath said the heart of Fianna Fáil’s submission was enterprise and job creation. He said the party proposed a modest increase in budget for enterprise boards, as well as the creation of an economic advisory council that would advise the Government on economic, as opposed to fiscal, matters.

He also defended the document against accusations that voters would consider Fianna Fáil untrustworthy over its stewardship of the economy.

“We would say to people that this is a very credible document,” said Mr McGrath. “The figures have been costed. It is innovative. We are being realistic. There’s something refreshing about an opposition parties putting in specific proposals that will hurt people and annoy some sectors,” he said.

Mr McGrath contrasted the party’s approach to Sinn Féin, which he said wanted tax and more tax. He also accused the party of “pulling figures from mid air”.