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Don't Increase Taxes On SMEs, Irish Government Urged

by Jason Gorringe, Tax-News.com, London

21 November 2012


Any further increase in the tax burden on the Irish business sector would do major damage and undermine the environment for job creation, the Irish Small and Medium Enterprises Association (ISME) has warned.

The claim is made in ISME's pre-budget submission, which calls on the government to implement a 75/25 ratio between spending cutbacks and revenue-raising measures instead of the 65/35 already proposed. ISME is concerned that the process of fiscal consolidation and austerity has had a more negative impact on economic activity than originally envisaged. In light of this, ISME warns that any further increase in the tax burden would do more damage to the business sector than larger cutbacks in expenditure.

According to ISME Chief Executive Mark Fielding, it would therefore be more appropriate for the government to focus on reducing spending. In particular, he points to an unaffordable social welfare bill, public sector perks and allowances, universal payments, and the cost of public sector pay and pensions. He explained that: "The government must introduce policies that will underpin competitiveness, support enterprise and instill confidence, both domestically and internationally, in an economy that continues to contract”.

The cost of employment is of particular concern to ISME. Any increase in employers' pay-related-social-insurance rates should be avoided, particularly in the climate of uncertainty and fear caused by proposals for a mandatory sick pay scheme, it argues. These initiatives would increase the cost of employment and the overall cost of doing business, and should therefore be avoided, the report concludes. ISME also recommends a reduction in government-influenced business costs, including commercial rates and rents and what it calls uncompetitive labour costs and tax-laden transport costs.

The current availability of the pay-as-you-earn tax allowance discriminates against directors and the self-employed, the report argues, and changes should therefore be implemented to put a stop to such discrimination. The report also recommends that capital invested by family members for the purpose of establishing or expanding a new or existing family business should receive favourable tax treatment, while tax incentives should be offered to home owners who use tax compliant verifiable trades people.

Finally, ISME wants to see the government develop an alternative bank, to introduce competition and investigate other sources of finance that can be made available to viable cash starved SMEs, and also suggests the introduction of a form of warehousing of non-core property loans.

“The Association believes that it is imperative that future growth be driven by the success of our businesses, particularly SME indigenous enterprises, the backbone of the economy. It is essential that the emphasis on austerity does not hamper the real economy and that we plan for the future by introducing pro-enterprise policies that will support business to grow, create and retain employment,” Fielding concluded.

TAGS: tax | economics | business | Ireland | tax incentives | fiscal policy | public sector | budget | small and medium-sized enterprises (SME) | unemployment | tax reform

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