Plans to slash the minimum wage by €1 (£0.84) to €7.65 (£6.47) in the Republic of Ireland and increase income tax combined with a staggered 2% hike in VAT to 23% have left retailers in the country facing an uncertain future.
The measures were outlined by the Irish Government on Wednesday as part of its four-year plan to cut spending by €15bn (£12.6bn), a requirement of its €85bn (£72bn) EU/IMF bailout. A detailed budget will be announced on December 7.
The Irish Government said it remained committed to leaving corporate tax at 12.5% but added that “no group can be sheltered” from paying income tax. Lower-income workers currently pay minimal tax due to the country’s tax credit scheme. Meanwhile, VAT will increase 1% to 22% in 2013 and by a further 1% in 2014.
Torlach Denihan, director of industry body Retail Ireland, said: “There is no getting around it - the budget is going to be tough.”
Retailers questioned the wisdom of reducing the minimum wage because it would reduce consumer spend without boosting government coffers.
Paul Geraghty, sales manager at menswear indie Geraghty of Galway, said he expected Christmas to be “OK” but that 2011 would be bleak.
Nigel Hamilton, owner of Bishops Footwear in Coleraine in Northern Ireland, and president of the Independent Footwear Retailers Association in the UK and RoI said it had been a “terrifying” couple of weeks, with customer confidence extremely low.