Indirect tax under scrutiny
by Niall Shanahan
The trade union-backed Nevin Economic Research Institute (NERI) has set out a detailed analysis of the effects of increases to indirect taxes and how they would affect people in different income groups. NERI researcher Micheál Collins said that, unlike the effects of direct taxes like income tax, very little consideration is given to the distributive impact of indirect taxes like VAT, fuel charges and levies. The new study estimates the distributive impact of possible budget changes in five key areas: VAT, fuel excises, insurance levies, tobacco excises and alcohol excises. It examines how such changes would impact on households with different incomes, and assesses how much they could raise for the exchequer. It finds that a 1% increase in the standard rate of VAT (currently 23%) would increase average household expenditure by over €113 a year, yielding almost €250 million. The effects of such an increase would have a far greater impact on lower income households.
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