The measure, announced by the British Chancellor of Exchequer George Osborne in June 2110, will see VAT on new product lines increase today 4th January by 2.5% to 20 % .
The bulk of items will increase gradually over the next few months, however.The move is expected to reduce the number of people from the Republic crossing the border to do their shopping in the North. It is hoped that with people shopping locally that the increase in sales may turn into jobs in the very near future.
The Northern Ireland Independent Retail Trade Association (NIRTA) has warned that the VAT rise will slow down the North's economic recovery and will cost jobs in the retail sector.
Research by the Centre for Retail Research and online shopping group Kelkoo has suggested that retail sales will fall by about £2.2bn in the first three months of the year as a result of the rise in VAT.
NIRTA CEO Glyn Roberts claimed the rise in the rate of VAT will turn out to be completely counterproductive. "I think this is a major mistake by the coalition government at a time when we need to stimulate consumer demand," he said.
Chancellor George Osborne has said it will raise more than £13bn a year by the end of the current parliament.
Bob Darke, commercial director at electrical retailer Comet, agrees: "There is no reason to believe that consumer spending can't continue at pretty similar levels that we saw in 2010."
John Lewis, Marks & Spencer, Tesco and other big retailers have said they will delay the introduction of the VAT increase on most or all of their products for at least a few weeks as they wait to see what action their rivals take.
Sainsbury's pledged not to increase the price of any item in its home and lifestyle ranges in January. Tesco said it would freeze VAT on all its non-food products until 25 January and would begin phasing in price rises after that.
Despite some restraint at first, retailers are eventually expected to pass on the VAT rises in their entirety, adding about 6p to a pint of lager, about 3p to a litre of petrol and several hundred pounds to the cost of a new car.
