Although there have been significant improvements in cost competitiveness over the last two years, business costs are still too high, according to a new report from the National Competitiveness Counc
The organisation said that while prices have fallen in Ireland since 2008, business-related costs such as legal fees and rents remain relatively expensive compared to other countries.
The report stated that restoration of cost competitiveness is central to any economic recovery. It said that many of the improvements to Ireland's cost competiveness have been due to the downturn in the economy and warned that prices may rise again once growth returns.
The council said structural reform is needed to deliver enduring cost competitiveness and called for additional taxation measures to be introduce to protect job creation and facilitate a recovery in consumer demand.
"Costs in Ireland are moving in the right direction and as a result Ireland has become a more attractive location to do business, but we cannot rest on the oars. Cost reductions have resulted primarily from cyclical factors like the collapse in consumer demand, domestically and internationally," said NCC chairman Dr Don Thornill.
"If we are to face down emerging threats such as increasing global oil prices and a resumption of inflation, Irish policy must deliver outcomes which embed lasting, structural reform. Only structural reform will ensure that the gains are permanent and will not be quickly be eroded upon any resumption in growth," he added.
The "Costs of Doing Business in Ireland 2011" report identifies barriers to competitiveness and sets out recommendations to address the issues.
The council calls for the introduction of a broadly based and equitable valuation based residential property tax and urges further investigation to see whether legislation could be enacted to facilitate downward rent adjustments for leaseholders.
It also calls for information to be collated on how the National Asset Management Agency (Nama) collects data and says Nama should provide more information on the loans it has acquires and how it proposes to deal with unfinished developments. These moves would provide certainty about the commercial property market, the NCC said.
The NCC said that challenge exists to protect those on low incomes and social welfare benefits while ensuring that incentives to return to the labour market are strengthened and encouragement given to businesses to take on additional staff.
In addition, the report calls for the phasing out of subsidies for peat generated electricity but urges against the introduction of a waste-to-energy levy.
The NCC also recommended the establishment of an independent regulator for the legal profession and said consideration should be given to the creation of a single tier counsel system.
It also said legal costs should be assessed on the basis of work done, rather than on the size of awards and said a Legal Costs Assessment Office should be established to replace the Taxing Master's Office.
Minister for Jobs, Enterprise and Innovation Richard Bruton said he would be writing to Government colleagues to start the process of implementing the council's recommendations.
"If we are to get back to the formula that created the real economic success of the mid/late 1990s and achieve sustainable growth, we must urgently address the structural problems in the economy identified by today's report: in the labour market, in property, in utility costs and in business and professional services," said Mr Bruton.
"I am determined that we must act urgently to implement reforms across the economy, in order to achieve real growth that can get people back to work both in the short term and for years to come," he added.
