The Government should reduce the adjustment in the forthcoming Budget by €500 million by abandoning new tax increases, according to the employers’ group Ibec.
It is the first time since the economic crisis began that the lobby group has differed with the Government over its Budget adjustment proposals.
Ibec says the Budget should be used to boost confidence and provide a spur to domestic consumption. It says such a message would lead to the Exchequer getting additional taxes by way of increased employment and economic activity, rather than by way of new taxes or increases existing ones.
Instead of going for the €3.1 billion adjustment the Government has planned, Ibec wants it to reduce the figure to €2.6 billion.
This would alter the two-thirds/one-third ratio for cuts in expenditure as against additional tax revenue that has governed much of the deficit adjustment debate to date.
Ibec says it is not seeking to reduce the amount raised by taxes, but rather to generate it by way of boosting economic activity, rather than by way of new tax measures. It says the domestic economy, which is vital to job creation, is being held back by depressed consumption arising from negative sentiment. So it wants people to be told there will be no new taxes beyond those already announced, as part of an overall message that the worst of the period of austerity is over.
Other elements in Ibec’s pre-Budget submission include a call that existing supports for the hospitality and related sectors, should be retained after the end of this year.
It also says it is essential that the Government does not increase employment costs by, for example, introducing statutory sick pay proposals or adjusting the pricing of private beds in public hospitals. The latter would lead to an increase in health insurance costs paid by employers.
Ibec chief economist Fergal O’Brien said the Government also needs to react to the UK’s strong push to improve its attraction to foreign direct investment. He said Ireland needs to ensure not just that it remains attractive to US and European multinationals, but also to Irish ones.
“Budget 2014 must clearly signal that the end of austerity is in sight,” said Ibec’s chief executive Danny McCoy. “This is so businesses and consumers alike can plan ahead with certainty. Proposed tax rises should be abandoned, employment costs frozen, and investment and activity in the domestic economy incentivised.”
Today, Siptu president Jack O’Connor said Ibec’s call was “a thinly camouflaged attempt to insulate the better off from tax commitments that are already scheduled, while inflicting more misery on the less well off”.
“Ibec is right in one respect, it is time to ease off on austerity. However it is also time for the rich to contribute something,” he said.
“We can actually get to the three per cent deficit target by the end of 2015 without inflicting more misery on the great majority of our citizens, although those at the top of the incomes spectrum will have to contribute a billion euro in extra taxes over two budgets to enable this to happen.”
