Mr. Fergal O'Brien:

I will make two very brief comments. Deputy Tóibín asked a question about the purchasing power in Ireland versus that in the UK. The latest numbers that IBEC has looked at show that in Ireland it is about 10% higher. The other thing that it is important to recognise is that Ireland does a very good job of keeping minimum wage earners out of the tax net; their effective tax rate is about 3%. In most other countries tax on minimum wage is quite high; in the UK it is about double. That is an important part of the conversation.

The reduced rate of VAT and the impact it has had on the economy is relevant to much of this discussion and the conversation we had on tax rates and revenue. The Deputy made the point that the VAT reduction would cost the taxpayer. I would argue that the VAT reduction has actually yielded revenue for the taxpayer because it put more people back to work. It showed the cost-sensitive nature of many of the sectors in which it would have impacted and ultimately it was an economic gain for the country. It actually benefitted the taxpayer. It took people off social welfare, put them back into work, ensured that employers were paying more employer PRSI and that there was more spending power in the economy. That is what appropriate tax rates can do in terms of supporting economic growth and activity but it also demonstrates the cost-sensitive nature of some of the sectors being discussed. If they have lower costs there will be more activity; if they have higher costs there will be less activity and unfortunately less employment. I think the VAT reduction proves much of that.