Irish Economy
Ireland: Spring Statement - Ibec seeks income tax cuts; higher public spending
By Michael Hennigan, Finfacts founder and editor
Apr 13, 2015 - 9:15 AM

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Ireland: Ibec, the principal Irish business lobby, today calls on the Government to reduce the "punitive" marginal tax rate of tax and to ramp up public spending — in particular to boost infrastructure. It wants commitments on "cuts to the marginal tax rate for all workers and ambitious investment in capital projects, education and innovation in the upcoming Spring Statement."

Without any reference to evidence, the lobby group calls for an ambitious long-term vision for science, technology and innovation funding by resetting the R& D intensity target to 3% of GDP in line with the Europe 2020 strategy" — it is currently less than 2% because the exporting business sector, which is dominated by about 40 Americans firms, does not engage in significant research in Ireland.

The lowest corporate tax and PRSI/employer social security rates in Europe are not enough and the taxpayer should provide more funds with no need to present evidence.

Ireland: Innovation with or without R&D/ scientific breakthroughs

A rise in GDP of 5.4% in 2015 is forecast.

Ibec's five priorities for the Government's upcoming Spring Statement:

  • "Reduce punitive marginal tax rate: Our income tax system is the most progressive in the developed world, but there is a trade off between this redistribution, the incentive to work and the ability of companies to attract and retain talent. The marginal tax rate remains punitive and the creation of third tier on earnings over €70,000 in the last budget was short-sighted and misguided.
  • Stop penalising entrepreneurs: With the higher rate of USC, the lack of an equivalent to the PAYE credit and the higher rates of capital gains tax introduced in recent years, our tax system has gone in the opposite direction to much of enterprise policy. If we are truly serious about creating a high skilled entrepreneurial economy these issues should be addressed.
  • Ramp up capital investment: Record low interest rates offer a once in a generation chance to invest ambitiously in the country’s future. The Government should commit to spending 4% of GDP on  infrastructure by 2020. Housing under supply in key urban centres has the potential to undermine competitiveness and make it more difficult to attract and retain talented workers. The government needs to do much more to address supply shortages. Our transport network is also far from complete.
  • Priorities education and research: We need to start reversing the cuts to education and research spending now. This includes ensuring the resources are in place to promote literacy and numeracy, reform the junior cycle, support the professional development of teachers, adequately fund third-level and encourage R&D.
  • Review public sector pay, but do it sensibly: As economic circumstances improve it is appropriate that public sector pay rates should be reviewed. The process must take into account the State’s limited ability to finance pay increases, relative pay levels in the public and private sectors, international competitiveness and the need for pension reform. Ongoing change and productivity must remain a central element of any review of public sector remuneration."

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