John Paul Phelan (Fine Gael)

I echo the sentiments of Senators Doherty, Quinn and Twomey about the Government's increase in VAT rates. At a time when the British Chancellor of the Exchequer is reducing VAT rates, it will have a detrimental effect on the take from VAT south of the Border. In other European Union countries, virtually all finance ministers are considering reducing various tax rates, not just VAT. Yet the Government is proposing a large number of tax increases, the most obvious of which is the 0.5% increase in VAT. It was obvious that the take from VAT this year would reduce somewhat anyway. The recently announced figures indicate that it has reduced significantly. Senator Quinn is right in suggesting it will be depressed even further by this rise.

Some retailers have proposed to absorb some of the increase themselves. However, not all are in a position to do so. Following a fall in the overall VAT take, a further increase in the rate will dissuade people from spending money at a time when the Government should be doing everything in its power to encourage people to spend to keep money circulating in the economy and keep businesses running. It flies in the face of every sort of economic view held by leading economists and part-time economists like myself and others as to how we should use our taxation system. It is an abuse of the system and makes no sense.

It has recently been brought to my attention that a number of retailers are encountering considerable difficulty with Visa card payments. The system operates via telephone lines. There seems to be a considerable problem with telephone lines at present adding to difficulties retailers are experiencing. I understand a number of transactions are not being completed because of faults with the network.

My substantive issue is the increase in VAT rates, which at this juncture is the last thing the Government should be proposing.