Dáil debates

Wednesday, 4 June 2008

7:00 pm

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)

This is the doctrine of the self-financing tax cut, which various prominent political personalities, to whom Deputy Varadkar refers occasionally in his contributions, have had resort to in the past.

Even if the reduction was passed on in full to consumers, the impact on the consumer price index would be only 0.18%. The question arises, and was discussed earlier in this debate, as to whether a reduction in VAT would be passed on to the consumer. The argument is put forward that such a reduction would not only increase our competitiveness but would reduce inflation and poverty. Speaking from experience, this proposition is highly optimistic. In 2001, our standard rate of VAT was reduced from 21% to 20%, but the expected benefits for the consumer did not materialise. The reduction in VAT was not passed on to the consumer and, one year later, the Government wisely reversed the reduction.

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