|Minister for Finance, Brian Lenihan, speaking in a television interview after presenting Budget 2010.
Irish Budget 2010: The following are reactions from accountants, economists and other vested interests to the Budget.
Simon Barry, Chief Economist, Republic of Ireland, Ulster Bank, Budget Commentary
Overall View of Budget
“The overall thrust of the budget is welcome. It represents another very important contribution to the absolutely necessary process of stabilising the public finances. However, the Minister was a touch shy of the €4 billion expected budget day package as the total announced package today reached €3.8 billion.”
“It appears as if the cuts in the public sector pay bill were not a severe as expected, with a €1 billion package somewhat shy of the rumoured €1.3bn.”
“This budget distributes an awful lot of pain but the reality is that the scale of the problem means that there is more to come with a further €3 billion in cuts expected in next year's installment including a further €2 billion in current spending measures. The actual announcement of the much flagged cut in the public sector pay bill will do little to relieve strains between the public sector unions and the government, and the need for further savings in day to day spending will likely see tension levels between the government and the social partners remaining high over the coming year.”
“The reduction and reversal on the previous VAT rate came as a welcome surprise.”
Car Scrappage Scheme
“The car lobby will be pleased with the car scrappage scheme. Economists, however, tend to be skeptical about the lasting benefits of such schemes.”
Excise Duties on Alcohol
“The reduction on excise duties on alcohol is a welcome step in countering cash flows going across the border. However one major uncontrollable is the exchange rate which is beyond the government’s influence.“
New review process for SME credit applications a constructive development, says IBF
The Irish Banking Federation (IBF) views the announcement by the Minister for Finance today to establish an independent review process for small and medium sized enterprises (SMEs) whose formal applications for credit facilities have been declined by a credit institution as constructive and helpful in building trust between the banking sector and SMEs.
Research undertaken by Ipsos MRBI as part of the independent Review of Lending to SMEs by Mazars (June 2009) shows business respondents advising a credit decline rate of 24%, while banks report an average decline rate of 14%. This new process will provide a mechanism to SMEs so declined to take their case to an independent review body once they have exhausted the credit institution’s own appeals mechanism. In this way, small business proprietors will be afforded a further opportunity to present to an independent body the facts and figures on the viability and repayment capacity of their business proposals.
While it remains to be seen how this review process will actually operate in detail, taken together with the existing statutory Code of Conduct for Business Lending to SMEs which facilitates access to credit for sustainable business propositions, it should be of further assistance in addressing the vexed issue of the supply of credit to SMEs.
“As the total level of lending documented in the Mazars report has shown, banks remain supportive of the SME sector through these very challenging times; not just in terms of finance but non-financial supports also. This new review process should provide further assurance to SMEs seeking credit for viable business propositions,” according to Pat Farrell, IBF Chief Executive.
Note: Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.
Establishment of a credit review system is a step in the right direction – CPA
The Institute of Certified Public Accountants in Ireland (CPA) said, in reaction to the budget
“This was always going to be a tough budget and the severity of cuts made today is essential for the restoration of public confidence, stabilisation of the national finances and a return to international competitiveness. Rationalisation of public sector pay and social welfare payments is something this government did not shy away from and we accept the unfortunate necessity of these cuts if we are to reposition Ireland as a competitive, well-resourced and ethically sound place to do business.”
“The critical issue facing many previously viable businesses is access to and drawdown of working capital finance. In this regard, CPA would have preferred that Government used its broader influence with the banking system to stimulate the flow of working capital; however the establishment of a credit review system is a step in the right direction. This needs to be an effective measure and we look forward to its practical introduction.”
“From a business perspective, any cost increasing measures such as the carbon tax adds to an already increasing cost base and has the potential to negate export-led growth. As recommended by the ESRI, carbon tax in the commercial arena should be ‘‘revenue neutral’’, with revenue generated ring fenced to offset other taxes or reduce costs for individuals or businesses. If a carbon tax is simply introduced as a new revenue stream, it will be yet another burden on industry.”
Regaining competitiveness remains key to getting us out of this recession – Chartered Accountants Ireland
The Minister for Finance has today chosen not to increase the overall burden of taxation on the economy, and Chartered Accountants Ireland believes this is the right course of action if we are to restore economic growth.
“It would have been wrong to increase the income tax burden on both public and private sector employees given the collapse in private sector income levels and the severe cuts in the public sector pay bill. Furthermore, stable rates of income tax and PRSI make a real difference towards preserving and growing employment levels” according to the Chartered Accountants Ireland President Tom Fitzpatrick. “They also help ensure that wage costs, often the largest component of the overall cost of goods and services, do not grow out of control”.
VAT and Excise Reductions
The modest reduction in the top rate of Value Added Tax, combined with the reduction in Excise Duties on alcohol may tackle the issue of cross border shopping, but should also offer some stimulus to the hospitality sector in particular.
At a time when the Minister has little scope for introducing tax incentives, he seems to have prioritised Research and Development and International Financial Services activities. This sends out a strong positive message about Ireland’s willingness and capacity to trade and deliver services internationally.
Finance Bill 2010
A feature of the Minister’s speech was the promise of significant measures to be introduced in Finance Bill 2010. We will not know until the publication of that Bill the full extent of many of today’s announcements.
While no-one would willingly advocate the cuts to Social Welfare Benefits and Public Sector Pay which the Minister has outlined, they will serve to help us manage the corrosive cost of servicing our national debt. Every euro paid in interest in servicing the national debt is a euro forgone in improving Social Welfare, our Health and Education systems and our national infrastructure.
The Minister has outlined a programme for the future shape of our tax system, including a radical restructuring of our Income Tax and PRSI codes. However, for now, the most important aspect of this Budget is that it is fit for purpose for the whole of 2010. There are still many hurdles to economic recovery, not least the prospect of increasing interest rates towards the back end of next year. The decisions not to increase the mainstream rates of income tax and capital taxes should mean that we can better deal with the challenges of the next few months.
Chartered Accountants Ireland unequivocally welcomes the Minister’s continued commitment to preserving the 12.5% rate of Corporation Tax. This is essential to Ireland’s competitive position internationally as a good location for foreign investment. Foreign Direct Investment is a critically important dimension of our economy
American Chamber of Commerce Budget Response
The American Chamber of Commerce gave a broad welcome to the Minister’s decision not to increase personal taxes in Budget 2010.
“We need our most talented people now more than ever and we must recognise that taxation plays an ever more important role in where mobile and highly skilled employees chose to live and work. Our personal tax rates on key mobile employees are already too high, especially for people with children and it is important that our personal tax regime is competitive and does not act as a disincentive to attracting these skilled workers," said Pat Wall, Chair of the American Chamber of Commerce Taxation Group.
Wall welcomed the strong restatement of the Government’s commitment to the 12.5% corporate tax rate, saying it was ‘an important tool in Ireland’s competitive armoury”.
He said that the promise to ‘look again’ at R&D incentives in the Finance Bill will be watched with interest by the multinational sector. “Subsidiaries of multinationals actively pursuing R&D deepen their importance in their own corporation and develop local mandates into new areas with positive benefits for jobs and sustained long term investment. We believe that companies should be allowed to off-set the R&D tax credit against either Corporation or Payroll taxes. By allowing subsidiaries of multinationals to book the tax credit against labour costs on a quarterly basis it would enhance Ireland’s competitive position against other inward investment locations”.
While expressing concern about the impact of the carbon tax on an already high energy cost base, “which will be kept under review to assess its impact on our member companies”, Mr. Wall said that “overall the budget represents a fair balance between putting our fiscal house in order, restoring our cost competitiveness and maintaining inward investment.”
The American Chamber of Commerce represents the interests of US multinationals in Ireland. Today almost 100,000 people are directly employed by 570 US companies in Ireland.
Irish domicile levy
"The introduction of a €200k levy for Irish domiciles with Capital Assets in Ireland of over €5m will raise little money. Instead, it may encourage them to close their businesses in Ireland leading to increased unemployment within the Irish job market," commented Martin Phelan, Head of William Fry tax Advisors
“Whilst the focus on increase in tourism is welcomed, the Minister should have looked at abolishing the €10 air travel tax brought in March 2009," commented Brian Duffy, a Partner in William Fry Tax Advisors.
"The reversing of the VAT rate to pre 2009 budget (0.5% reduction) is a step in the right direction. However, if the Minister is looking to stem cross boarder shopping he should have gone further and matched the 17.5% rate in the UK,” commented Sonya Manzor, a Partner in William Fry Tax Advisors.
Society of Chartered Surveyors
The Society of Chartered Surveyors has said it is disappointed that no action has been taken in the budget to manage the unprecedented decline of the construction industry.
The SCS had called on the Government to implement the proposals of the Construction Industry Council (CIC) which called for additional investment in infrastructure. The investment, equivalent to €5bn per annum for three years, would save 70,000 jobs while improving overall economic performance and competitiveness.
The President of the SCS, Ken Cribbin said a further cut of €960 million in investment projects will compound a further increase in unemployment within the construction industry where 100,000 jobs are already at risk in the first half of 2010 as a number of major infrastructure projects reach completion.
“The announcement to introduce a ‘National Solidarity Bond’ is welcomed as a vehicle to encourage investment in infrastructure, however, further detail is required. It is important that such an initiative be expedited to protect jobs that are under threat” Cribbin said.
The SCS welcomed the Ministers proposal to undertake an immediate review of property tax. “There is a need to widen the tax base as there has been a lengthy period of over-reliance on stamp duty. Such a tax should be implemented hand-in-hand with a reduction in stamp duty rates. The SCS would welcome the opportunity to have input into this review” Cribbin said.
The SCS said it also supported the recent announcement by the Minister to undertake an ‘efficiency review’ of the Local Authorities. Streamlining the number and operation of local authorities will facilitate efficiencies in management structure. Consolidating the various local authorities should lead to improvements in coordination and implementation of planning and development policy.
Public sector reform defined by fiscal constraints but vision for long term reform needed - Deloitte
Public sector employees need clear view of how their role shapes an efficient service
Budget 2010 outlines how the public sector reform will be achieved by reducing the public sector wage bill in addition to savings across a number of departments.
Commenting on this, Harry Goddard, Public Sector Partner at Deloitte said: “The public sector pay bill was targeted as expected today. In conjunction with the pension levy and the early retirement scheme, the effect of this is that public servants are being asked to do more with less pay and fewer resources. In addition, any of the public sector reform initiatives that have been discussed by the government have focussed on work practice changes – likely to be further pain for the public service.
Given the country’s current balance sheet, it’s clear that the main driver of reform in the public sector needs to be driven from a cost perspective. While the news today was expected, the government needs to set out a vision for sustainable long term reform which can be achieved beyond just cost reduction. This needs to be in a manner that will provide employees in the public service with a clear view of their role in helping shape the service to be more efficient in the context of the revised fiscal framework.
Public sector workers now need a positive to focus on that will help them ensure a sustainable delivery of quality services. One of the major actions that now needs to happen is for this vision to be developed and communicated to those working in the public sector to help support employee morale and motivation.”
Budget does not articulate future sustainable position for Ireland - Joe Carr, Mazars
While Budget 2010 has demonstrated to the outside world that the government is balancing its books and Ireland is taking its’ problems seriously, it is a missed opportunity to herald clear vision and the fundamental change the nation badly needs, said Joe Carr, Managing Partner of international accounting firm, Mazars.
“As with the McCarthy Report the Government has not used this opportunity to articulate where Ireland’s future sustainable position will be, what priorities we must focus on and thus what criteria have been used in formulating this Budget.”
“The Minister stated that he was not making cuts in the abstract, but deciding where they will fall, but in general most of the cuts were designed to be across the board and did not specifically focus on identified priorities.”
Whilst I recognise that a budget making fundamental cuts to expenditure was required, I would have preferred a more insightful, nuanced and focused approach.
“Unfortunately, the government has failed to seize the opportunity demanded by the current economic crisis to articulate and champion a different way for our people, our society and our economy.”
Ernst & Young
Economics of budget 2010
Neil Gibson – Ernst & Young Economic Eye
The Irish budget pulled no punches in assessing the reality of the economic situation. The economic rhetoric around restoring competitiveness and taking decisive action to curb public debt is to be commended. Grasping the nettle of public sector costs and at the same time retaining key business incentives such as the 12.5% corporation tax may have been expected but the corporate message they send to the international community is a powerful one. For public servants and those on benefits however, the pain of the budget should not be understated. The high wire act in balancing public pain with business support will make for a challenging 12 months ahead.
Delaying rebalancing measures could have occurred with the extension of the EU stability requirements (returning annual debt to 3% of GDP) but this not the case with the minister suggesting that this would be ‘the last big push’. Unlike much of the rest of the economic reasoning this is on rather shakier ground – future budgets are unlikely to bring much respite from the cost cutting approach and much depends upon the succe4ss of the export base and hence the global economy to avoid future sharp reductions in spending and tax rises
Introduction of Carbon Tax
Declan O’Neill – tax partner
The introduction of a carbon tax at €15 per tonne was lower than the projected starting point of €20 per tonne. While there was a welcome announcement that the proceeds of the tax would be utilized to boost energy efficiency and reduce fuel poverty, the tax is being viewed as a new source of revenue by the Government. This is contrary to the recommendation of the Commission on Taxation.
Fred Kerr – tax partner
As expected the Minister indicated that he has accepted the Commission on Taxation’s recommendation that pension lump sums below €200,000 should not be taxed. However the exact tax treatment of sums above this level and rate of tax relief on pension contributions going forward will be considered in the Government’s National Pensions Framework to be published shortly by the Minister for Social and Family Affairs. These measures have been met with some resistance from the pensions industry given the uncertainty in relation to the future tax treatment of pension contributions and drawdowns.
Corporate Tax/ Ireland Inc. Competitiveness
Kevin McLoughlin, head of tax service
The continued commitment to the 12.5% rate is to be strongly welcomed particularly against a background of increasing international uncertainty on the point. The Minister’s intention to look to push Ireland as a hub for the financial service industry generally and the funds industry specifically is to be welcomed. While no specific stimulus measures were announced in the budget, these have been promised in the Finance Bill. These will be eagerly anticipated by the industry which is struggling to maintain employment levels in Ireland. Recommendations of the Innovation fund in terms of amendments to the current R&D and intangible asset regimes will be eagerly anticipated. The announcement today in the UK to introduce a 10% tax base for patent income should focus the mind of the minister on the need for radical action in order to stay competitive on both fronts.
Jim Ryan – tax partner
No reduction in the minimum wage is disappointing as this was expected to have been brought into line with social welfare.
A reduction in employers PRSI has also been overlooked, a move which would have helped with Irish competiveness. The move to increase focus on Irish domiciles will also be challenging given the lack of information about the large majority of these people bar a few high profile exceptions.
The Net effect of reducing the level of income which high income earners can protect, with various tax reliefs from €250,000 to €125,000, will have the impact of increasing the minimum amount of income tax which they will pay from 20% to 30%, plus PRSI and the various income levies.
Jarlath O’Keefe – Indirect tax partner
- Excise – the reduction in Excise Duty rates on alcohol related products is a move in the right direction to stem the flow of cross boarder shopping. Unfortunately, the minister is constrained by the fact that he cannot alter exchange rates which together with the cost of doing business in the South of Ireland are the main factors causing the flow of traffic North.
- Car scrappage – The car scrappage scheme will be welcomed by the motor industry albeit the would have preferred if it had been introduced last year. I imagine that there would need to be easier access to finance in order for the scheme to be successful.
- Vat rate – The reduction in the VAT rate from 21.5% to 21 % from 1 Jan 2010 is an admission that the corresponding increase last year was a mistake. The reduction by itself is unlikely to act as a stimulus to increase consumer spending.
Drinks Industry warmly welcomes Government decision to reduce excise by 20%
The Chairman of the Drinks Industry Group of Ireland (DIGI)*, Kieran Tobin, has warmly welcomed today’s Government decision to reduce excise rates by 20% as outlined in the Minister for Finance’s Budget 2010 statement.
Tobin said this cut combined with the planned VAT reduction will come as a great relief to consumers, to retailers, to the pub and hospitality sector, and the wider drinks industry and will repatriate some of the revenue currently being lost to cross-border trade.
He added that DIGI is very confident that the full excise cut will be passed-on immediately to consumers as requested by the Minister.
Tobin commented, “The Drinks Industry Group of Ireland wholeheartedly welcomes the Minister’s announcement. We have consistently said that our high level of excise that subjects consumers to the highest alcohol taxes in Europe, has been a major factor in encouraging cross-border shopping, where the lower UK excise and VAT regime combines with the Euro/Sterling price differential, to make prices significantly cheaper.
“With alcohol a key driver of cross-border trade, this announcement will change recent patterns of cross-border shopping and will provide a real stimulus to the wider economy by encouraging people to shop and socialise locally.
“In the context of this very positive decision, DIGI will continue to work with Government to support our industry and the 85,000 jobs we sustain, as well as the State and export revenues we generate.”
Excise duty reduction will benefit the Irish food sector
Food and Drink Industry Ireland (FDII), the IBEC group that represents the Irish food sector, today welcomed the reduction in excise duty on alcohol saying that it would have a positive benefit on the Irish food and drink industry, which has lost over 3,000 jobs this year.
FDII Director Paul Kelly said: “High levels of excise duty on alcohol and the resultant price differential has been a major factor in driving Irish consumers across the border. This has had a knock-on effect on the grocery market with €900 million worth of lost sales south of the border. Food companies have cut costs and undergone significant realignment of their businesses throughout 2009. This has delivered extra value to consumers with food prices reducing by over 6%.
“Consumers should now take advantage of this great value by shopping locally and supporting Irish jobs in the Irish food industry and retail sector. Value would continue to improve even further in the New Year when Irish VAT reduces by 0.5% and UK VAT increases from 15% to 17.5%.”
CIF response to Budget 2010
The Construction Industry Federation (CIF) has said that the Government’s decision to cut nearly €1bn from its capital investment programme represents a blow to jobs in its sector and will significantly impact the Exchequer through lost tax income and increased social welfare payments.
In respect of the Budget’s housing measures, the CIF has welcomed the continued availability of full mortgage interest for first time buyers who purchase their new homes in 2010. This provides valuable taxation benefits for buyers over the first 7 years of their mortgage.
Speaking in the immediate aftermath of the Minister’s Budget Speech, CIF Director General Tom Parlon said: “The Government’s decision to target the capital investment programme is regrettable in light of the huge loss of employment already in the construction sector and the impact this is having across the wider economy. The fact that the cuts disproportionately affect the construction intensive elements of the programme is particularly disappointing from a jobs perspective”.
“The capital budget for the period 2010 to 2013 has now been reduced by over €15bn as a result of measures over the last four budgets. In real terms, this means the cancellation of a large number of school building, social housing, water services and transportation projects. This will directly and significantly impact the future competitiveness of the economy and Ireland’s ability to attract inward investment. It will also impact directly on the daily lives of individuals and families as has been illustrated by the recent devastating flooding throughout large parts of the country that could have been avoided if the necessary investment went ahead.”
“The most immediate impact of the cutback, however, will be felt by the Exchequer. Over the last 2 years, 200,000 jobs have been lost in construction and its related sectors. A further 100,000 jobs are at risk because of the reduced level of both public and private investment. Today’s announced cuts make this prospect ever more real, with serious consequences for the public finances. Every job lost represents a significant cost to the Exchequer. A construction worker on the industry’s REA pay rates contributes €17,000 in taxes each year. A construction worker who loses his job costs the Exchequer €18,000 in social welfare payments, and of course his previous tax contributions and spending disappear. This represents a €35,000 turnaround to the Exchequer for every construction job lost, and a substantial proportion of the savings achieved through cuts in day-to-day spending will be cancelled out in this way”.
“The CIF has repeatedly made the point that investment in construction offers the most immediate and most effective means of stimulating economic activity and protecting jobs and that this has been the tried and trusted approach adopted internationally. We regret the fact that the Government here has chosen instead to reduce its infrastructure spending. The other worrying factor is that there is little evidence to suggest that the government is spending anyway near these reduced figures. It is vital therefore that the Government ensures that all spending agencies are geared up to spend their full capital allocation in each of the next four”.
Referring to the proposed National Solidarity Bond, Parlon stated: “The CIF looks forward to discussing the details of the Bond as an addition to the public capital programme with the Minister”.
In respect of the housing market, Parlon continued: “While disappointed that the Minister has indicated his intention to abolish mortgage interest relief in the longer term, the CIF does welcome the fact that he has provided a transitional period of 18 months for first time buyers. This means that first time buyers of new homes in 2010 will continue to qualify for maximum mortgage interest relief for purchases during the year. The value of this mortgage interest relief is conservatively put at €10,000 over a period of 7 years”
“The CIF also welcomes the announcement of the proposed credit review process aimed at ensuring the flow of liquidity within the economy. Many construction companies continue to experience difficulties in securing working capital and this has very negatively impacted employment in the sector.”
Commercial Property -- CBRE
Property consultants CB Richard Ellis this evening described today’s Budget as “tough but necessary” saying that while cuts to public sector pay, social welfare, children’s allowance as well as cuts to public and capital spending undoubtedly create huge challenges for many, the Government had little choice but to implement such measures in order to restore the public finances and improve Ireland’s reputation internationally.
According to Marie Hunt, Director of Research at CB Richard Ellis, “The biggest single issue facing the commercial property industry in Ireland over the last two years has been the lack of liquidity in the banking system. We are encouraged by the fact that the Minister has categorically stated in today’s Budget that he intends to use powers under the NAMA legislation to review credit provision to businesses and SME’s. Improving the availability of credit to businesses and households is critical in order to stimulate the economy and in turn the property market.
However, the most welcome aspect of the Minister’s Budget speech today was his assertion that the 12.5% rate of corporation tax will not be altered. Most of the corporate occupiers who locate in Ireland are doing so primarily because of this favourable tax regime. Any amendments to the corporation tax rate would have had severe implications for investment and job creation so it is encouraging that the Government have confirmed that this rate ‘will not change’.”
Tourism - - Irish Hotels Federation
Matthew Ryan, President, Irish Hotels Federation (IHF) welcomed the Government’s creative response to expanding Ireland’s tourism attractiveness by providing overseas citizens over 66 years of age with vouchers for reduced travel costs on rail services within the country.
“This voucher scheme offering discounts is a great step in the right direction. It will provide a major boost to Ireland’s appeal to this lucrative market abroad – some 80 million senior citizens in the EU alone. This initiative, in combination with low cost access fares to Ireland and the fantastic value packages available in Irish hotels and guesthouses, will strengthen our promotional assets. Our hope is that the scheme is meaningful, effective and easy to access for the target market. In the UK alone, there is a market of 9 million over 66s who have the time, discretionary income and inclination to travel. With the right scheme, this could be a great boost to reinvigorate our largest tourism market – which is currently in decline,” said Ryan.
AHCPS expresses opposition to brutal and grossly unfair reduction in pay for higher civil servants
The Association of Higher Civil and Public Servants (AHCPS) has described today’s decision by the Government to introduce a pay cut of up to 7.9% on higher civil servants as a brutal and grossly unfair reduction in the pay of individuals who work hard on behalf of the State and who have already endured major salary decreases as a result of Government cuts.
The AHCPS General Secretary, Dave Thomas, said “In the last 12 months my members have had to endure pay cuts of up to 17% through the introduction of income and pension levies. On top of this, they must now endure a further cut of between 6.3% and 7.9%.
“A single person in the private sector earning a similar salary will have had no change to their net income as a result of this Budget. This is blatantly unfair, and proves that the Government has chosen to selectively penalise public sector workers.
“Our members have committed themselves to public service for many years. We have always recognised that given the perilous state of the public finances there is a clear need for reductions in the public sector pay bill. We played a constructive and positive role in the pay talks that sought to reach a compromise between the Government and public sector unions, and given today’s outcome it is all the more disappointing that those negotiations collapsed last Friday.
“I will now consult with the AHCPS Executive Committee and other public sector unions to plan the way forward and decide how best to respond to these cuts.”
Jones Lang LaSalle
As expected, today’s Budget by the Government predominantly concentrated on improving the country’s financial deficit, reducing future public spending and generally providing the fundamental basis for Irish economic recovery. As such Jones Lang LaSalle understands the basis of this years’ budget and its initiatives and largely welcomes it as a result.
While the Budget did not include any provisions which will automatically deter the recovery of the Irish commercial property market, neither did it introduce any far reaching stimuli measures, for example, a reduction in commercial stamp duty would have aligned Ireland with the European norm and helped the competitiveness of Ireland as an investment location.
The cuts in child benefit and social welfare payments and increases in carbon taxes will impact consumers and their ability to spend which usually has a direct knock-on effect on the performance of the retail market. However this may well be counter balanced somewhat by the 0.5% reduction in the overall VAT rate from 21.5% to 21%. The retail property sector is in particular distress at present and the Budget initiative to reduce the consumption tax on alcohol will probably not be singularly sufficient to convince shoppers not to travel cross border into Northern Ireland for more competitive prices. This may well slowdown the recovery of the retail property sector going forward.
The Budget decisions on the main taxes impacting businesses - such as leaving corporation tax unchanged & reducing VAT – are positive and should assist those businesses which are struggling to survive in the downturn.
Irish Exporters Association
John Whelan, CEO of the IEA said: “Public Sector pay reform was essential but so was tackling key competitiveness issues and measures to stimulate the export sector. In particular it is important to point out that all exporters have stated the need to reduce by 20% the cost of energy for their factories and transport facilities. Not alone did the Budget not address this critical competitiveness issue, it added to the cost by way of the Carbon Tax.”
He added; “The Budget also failed to give any meaningful support or stimulus for the food export sector which accounts for 57% of total indigenous exports in the critical areas of credit insurance or sterling exchange exposure. Both of these issues have been the cause of over €1 billion in lost export sales and approx. 10,000 jobs to the sector over the past 12 months.”
In conclusion the IEA stated that the Banking sector refunding and the Public sector finances have been meaningfully tackled by the Government, a serious re-evaluation of the stimulus measures for the export industry would now have to be tackled.
The Budget measures to increase and enhance employment and training are especially needed as a way of aiding the recovery of all commercial property sectors in Ireland. We have already seen an increase in FDI tenant interest in the Dublin office sector during 2009 so the budget measures to assist or increase this trend - such as targeting Ireland as a European Hub for the International Funds Industry - are of particular importance to the recovery of our office market going forward.
Budget puts Ireland on sustainable path - - IBEC
The Director General of the business and employers organisation IBEC Danny McCoy said: "This budget is a turning point as it stops the deficit rising and puts Ireland on a sustainable path. The right thing to do was the hard thing to do and the right thing has been done. Confidence can now be restored both to consumers and to international investors.
"To get the country back to work, the public finances need to be stabilised without further major increases in taxation. It is of critical importance that we make the necessary correction now, rather than dragging it out over many years.”
Particularly constructive measures in the budget include:
- the reduction in indirect taxes;
- training places for the unemployed;
- reductions in employers’ PRSI associated with new employment from the Live Register;
- the intention to broaden the tax base, allowing employment taxes to remain low;
- the national solidarity bond to support capital investment;
- the affirmation that Ireland’s low corporation tax will remain;
- the intention to rationalise levies on income.
IBEC said that the government could have done more to direct significant funds towards keeping people in work, rather than spending the same funds on supporting those people as they lose their jobs. Also, it is regrettable that the carbon tax is mainly a revenue raising measure: a more effective environmental policy would have fully ring-fenced all revenues from carbon tax to support energy efficiency and labour cost reduction measures.