Cut in tax on jobs urged by food grouping

THE Government must reduce taxes on employment as part of a drive to help sectors hit by the continuing strength of the Irish pound against sterling, an Oireachtas committee has been told.

The plea was made by the Food Drink and Tobacco Federation (FDT) to the Finance and General Affairs Committee, which has a formal role in evaluating pre Budget submissions.

It follows the call on Thursday from the Irish Exporters Group, IREX, for the establishment of a contingency fund to support firms suffering from the pound sterling exchange rate.

Since the 1993 devaluation, the Irish pound has appreciated by close to 17 per cent against sterling, significantly reducing, or eroding, the margins on exports from many Irish firms to Britain, according to IREX.

FDT, in its submission to the Oireachtas committee, said it wanted a reduction of employers PRSI from 12.1 per cent to the British level of 7.2 per cent, to enable manufacturers here to address lack of competitiveness in labour and other costs.

"Given the continued strength of the Irish currency," said the EDT director, Mr Ciaran Fitzgerald "Government must take steps to reduce imposed costs on industry, particularly those industries which are labour intensive and export focused, such as the food sector.

Pending the change, the EDT proposed that the threshold at which the lower rate of 8.5 per cent employers PRSI is set, should bed raised from £13,000 to £17,000.

This would be to the advantage of the food, drink and tobacco sector.

A reduced PRSI rate would allow Irish food companies "regain competitiveness and maintain market share in the UK (which takes 40 per cent of the sector's exports). And it would help them to compete with imports of UK grocery goods which account for 70% of the total".

The EDT argues that its proposals would be self financing. The cost would be offset by the savings on social welfare payments to the sector, where job losses arising from lack of competitiveness are inevitable.

However, the Minister for Finance, Mr Quinn, has said he has no plans for measures to aid exporters to Britain.

In a written reply to a Dail question last week Mr Quinn said the responsibility for protecting companies from currency fluctuations lay primarily with the companies themselves.

He told the deputy leader of Fianna Fail, Ms Mary O'Rourke, that he was conscious of the concerns about the impact of recent movements against sterling.