Tax changes welcomed

SHANNON Chamber has welcomed a broadening of the tax base in the Government’s four-year plan and the decision not to raise corporate tax but has criticised the preservation of the Croke Park Agreement.
“In broad terms, the chamber welcomes the focusing of having €2 in expenditure savings for each €1 in tax increases, albeit preferring a model of €3 expenditure savings for each €1 in tax increases,” said chamber president Ian Barrett.
“Foreign Direct Investment plays a key role in job creation in Ireland, both directly and indirectly, in downstream support activities and services. In this regard, we see the commitment to the 12.5% corporation tax rate as being critical to attracting new investment into the country and equally in sustaining existing jobs,” he added.
However, he said there here elements of the plan the chamber didn’t agree with. “Our two largest areas of concern are in addressing the structural imbalances in our public finances and whether there is enough in the plan to address the key requirements of achieving 2.75% per annum growth and significant job creation.”
With regard to State spending, he said, “It is now widely understood that wage rates in the public sector are high when compared to either the private sector or to pay rates in the public sector of our European counterparts. Immediate action should have been taken to address this structural imbalance but the Government is sticking slavishly to the Croke Park Agreement and protecting existing public sector wages and pensions. We think, given the current grave economic crisis, that this is a significant mistake.”
He said the chamber was “very concerned” about the level of public sector reform that will actually happen despite the provisions of the Croke Park Agreement.
Mr Barrett said there was little in the plan to promote the creation of jobs. “Measures aimed at job creation are sadly lacking. The tax increases and spending reductions coming between 2011-2014 will result in very weak domestic demand and in the absence of very specific job creation measures. Most of our growth is dependent on a strong recovery in the global economy and our export-focused companies. While we welcome the reduction of €1 in the minimum wage as an aid to job creation, it will still be among the highest in the EU, acting as an unnecessary impediment to job creation.”
He said that there was likely to be some deviation from the document released last week. “Overall, we can expect some changes in exactly how the €15bn in financial savings will be achieved, given the likely change in Government early next year and there will inevitably be some disquiet as the totality of the measures required to deliver the €15bn savings sink in, but, at the end of the day, while the nation is deeply disappointed that our Government has led us into this terrible financial situation, the Irish are a very determined, energetic, realistic, highly adaptable and educated people and we will recover from this hammer blow.”
He said tat there were still some grounds for optimism.
“From an international perspective, we are re-committing to having an island that is very business friendly, protecting our investment in education and the provision of a highly educated workforce and committing to providing a lower cost base. Ireland is very much open for business and determined to build on its economic strengths.
“With a Government and business sector working together, we can and will rebuild a sound, broad-based economy, avoiding over reliance on any one business sector,” the chamber president concluded.