Retail Ireland, the IBEC group that represents the retail sector, this week said that new CSO retail sales figures highlighted a pretty dismal start to the year for Irish retailers and suggested many consumers had made purchases in November and December to avoid the January VAT hike.
The CSO Retail Sales Index showed that seasonally adjusted retail sales, excluding cars, fell by 1.6 per cent compared to December 2011. Retail Ireland said that if this trend continues the government must look again at the decision to increase VAT.
Retail Ireland director Stephen Lynam said: "The January VAT hike may have caused consumers to make purchases at the end of last year, instead of January. Despite relatively robust sales in November and December, consumers appear to have shunned the January sales.
Department stores were particularly badly affected, with sales falling by 18.4 per cent in the month; sales of electrical goods were down 12 per cent, while sales of clothing and footwear were down 5.7 per cent. Overall, retail sales are down by around 30 per ceny compared with the boom era. Consumer sentiment is weak and the outlook remains uncertain.
"The high cost of rents, rates, tax and labour are causing retailers real difficulties and depressing consumer demand. Action is needed on all these fronts, including a review of VAT returns at the end of next month. If the Government's target is not met, as now seems likely, the two per cent increase should be reversed,” he said.