A spokesman for An Post has warned that postage prices could rise by 21% following a proposal by the European Commission to apply VAT to national postal services, including stamps.
If VAT is applied at the top rate the move could see the cost of a standard stamp rise from 41 cents to 49 cents, according to An Post.
VAT applied at the lower rate of 13.5%, would see a standard stamp increase by between 5 and 6 cents.
European Commissioner for taxation Frits Bolkestein said his VAT plan is designed to end unfair competition between the traditional public sector suppliers, currently exempt from VAT, and private competitors, which have to charge VAT.
He said it should not significantly impact on the costs of postal services for consumers. He said countries could apply to have a reduced rate of VAT on postal services of items weighing up to 2kg.
Commissioner Bolkestein said that the proposed changes would also allow postal operators to reclaim VAT incurred on their own costs, which was currently passed on to consumers as a 'hidden VAT charge'.
An Post's spokesman described the proposal as bad news for the semi-State group, which lost nearly €7m in 2001, and it reported to have made significantly greater losses last year.
Last March the Commission for Communications regulation (COMREG) approved a 3-cent increase in the basic price of a stamp to 41 cent.
