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Irish Accountancy Body Welcomes Budget

by Jason Gorringe,, London

11 December 2009

Irish Finance Minister Brian Lenihan has been praised by the Chartered Accountants Ireland (CAI) for finding necessary savings whilst only nominally increasing the burden on the Irish taxpayer in the budget.

In a statement released on December 9, the CAI welcomed measures contained in the budget:

"The Minister for Finance has … 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."

Due to the planned cuts in public sector wages, the CAI backed the government's decision to maintain income tax rates.

“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."

“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."

Prior to the budget announcement, Lenihan admitted that increasing the value-added tax rate at the same time that the United Kingdom reduced its rate was a mistake, and fueled an increase in cross-border shopping, with taxpayers crossing the border with Northern Ireland to take advantage of lower VAT and the strong euro.

Against this background the CAI has welcomed the government's decision to improve the competitiveness of the Irish economy against that of the UK: "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."

Despite Ireland's precarious fiscal position, the CAI has said that the decision to extend incentives for new start-ups, maintain incentives for research and development companies and continue promoting Ireland as a leading finance center, are a step in the right direction, and sends a positive message about Ireland's commitment and capacity to trade and deliver services internationally.

Reflecting on retrenchment measures in the bill, the CAI statement added:

"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."

Concluding, the CAI said that it "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," the body argued.

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