Brian Lenihan Jnr (Dublin West, Fianna Fail)

Moreover, from 2013 it is proposed that allowances will be auctioned and this issue will no longer arise. However, it remains a matter for consideration for the next number of years.

Ireland has a low burden of taxation in respect of labour and capital, a policy the Government is intent on maintaining. It has stood us well up to now and I have no doubt it will continue to provide a sound basis for our economic well-being, allowing Ireland to remain an attractive location for investment. Our approach to indirect taxation has been to provide for a broad but balanced application of VAT. Reducing the lower VAT rate of 13.5% by one percentage point, as proposed in the motion, would result in significant losses to the Exchequer to the tune of approximately €396 million in a full year, or more than €200 million in the balance of this year. That is a substantial amount of revenue to hazard in a year in which revenue receipts have been well below the usual amounts.

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