The Irish Government is expected to reveal plans to increase Vat from 21% to 23% tomorrow (Tuesday).

In a television address last night, Ireland’s Prime Minister Enda Kenny warned the nation it faces fresh spending cuts and tax rises.

Retailers in Ireland fear that the move could spark a revival of cross boarder shopping. At the height of the recession shoppers in Ireland flocked to Northern Ireland to take advantage of cheaper goods.

The UK Government raised Vat from 17.5% to 20% in January as part of its measures to cut the deficit, forcing retailers to either absorb the rise in order to keep price low, or pass on the increase to customers.