The retail sector has been left outraged over a decision by Dublin City Council to increase commercial rates by 3.3%. Retail Ireland said the move would make shopkeepers in the capital less competitive and will put employment in the sector under further pressure.

Dublin City Council slashed their infrastructure budget for 2009 last week with City Manager John Tierney saying the capital budget would have to be cut to €1.86 million, resulting in the shelving of several development projects in communities across the city.

However, it is the decision to increase commercial rates, from which the council hopes to gain an extra €15 million, that has drawn most immediate criticism.

The council is also cutting costs within its own organisation, cutting its payroll by 3%, while its budgets for consultancy, advertising and public relations will all be cut by a massive 50%.

The move follows a direction from the Government to all public sector organisations earlier this year.

Before voting on the 3.3% increase, some councillors expressed concerns about the impact the rate rise would have on business, especially given the decision by the British government yesterday to reduce its VAT rate.

In a statement, a spokesman for Retail Ireland said: "The decision by the UK Government to reduce their VAT rate to 15% makes Ireland less competitive in comparison to our nearest neighbour. It will compound the problem of people crossing the border to shop.

"As a country we need to look at our VAT rate and consideration should be given to a lower rate as part of a package to stimulate the economy and reverse the decline in retail sales."

(DW)