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IBEC Raises Concerns About Labour, Property Taxes

by Jason Gorringe,, London

02 October 2012

The Irish Business and Employers Confederation (IBEC) has raised concerns about the operation of Ireland's planned new property tax and warned that any government-imposed increase in labour costs will hit the economic recovery.

The comments are made in IBEC's pre-Budget submission, which sets out a range of fiscal priorities IBEC believes the government should follow. A major concern is the property tax, plans for which have been controversial and generated opposition.

The government is committed, under the terms of its European Union (EU)/International Monetary Fund (IMF) bailout, to the introduction of a comprehensive property tax by 2014. In January, it implemented a EUR100 household charge as an interim measure, but was met with calls for a boycott by several members of parliament. Last month, Finance Minister Michael Noonan rejected the IMF's recommendation of a 0.5% rate, thought to be double that under consideration by the government. It is expected that the tax will become payable from July 1 next year.

In its submission, IBEC warns against collecting the levy through the tax credit system. According to IBEC Director General Danny McCoy, there is a danger that this could make taking up a job less attractive. He explained: "It is essential that a new property tax is not perceived as a tax on work. Collecting the property tax through the income tax system will discourage work and fuel wage pressures, which will make creating new jobs all the more difficult. If it is the chosen system, it should have very few exemptions, so that the tax is not viewed as simply an additional tax on workers."

The impact of any new taxes on the labour market features heavily in the submission. Increasing pay-related-social-insurance (PRSI) would have a negative effect, McCoy said, and would "fly in the face of international best practice". Similarly, McCoy referred to the government's proposal for a statutory sick pay scheme as an extra tax on jobs. This would cost at least 3,500 jobs both directly and indirectly in the economy, he argued.

IBEC believes that a package of measures to support growth is needed. The submission recommends a number of measures IBEC would like to see included in the Budget, which it says involve no net additional cost to the Exchequer. The proposals include the introduction of a roll-over tax relief for entrepreneurs, to encourage reinvestment into Irish start-ups and growth companies. The Employment Investment and Incentive Scheme (EIIS) should be extended and improved, by introducing a risk-sharing model targeted at a wider group of new investors. The Research and Development Tax Credit Scheme could also be enhanced, as could the tax treatment of skilled mobile workers, the submission urges.

McCoy said: "Any increase in labour costs will make companies less likely to take on new staff and will push already struggling firms out of business. We desperately need to create news jobs, raising tax on work is the last thing we need...Austerity alone is not the answer, we need government to deliver the conditions for economic growth. We need an ambitious growth strategy that supports investment, addresses the weakness in the domestic economy and rebuilds confidence."

Noonan will deliver his Budget in December.

TAGS: Finance | tax | investment | business | Ireland | property tax | fiscal policy | real-estate | entrepreneurs | budget | social security

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