Tax burden on workers causing drag on recovery, says Ibec

Ibec says the tax burden on Irish workers is too high and is causing a major drag on recovery in the wider economy.

In a report published today, the employers group said income tax rates here were now “completely out of line” with competitor countries. This was making the move from welfare to work less attractive for prospective workers, as well as making it more difficult for firms to attract “much-needed mobile talent” into the country.

The group hit out at the Government’s pension levy, describing it as an inequitable and unjustifiable tax on the savings of private sector workers. While it had been necessary to broaden the tax base in the austerity budgets, Ibec claimed the process had gone too far and was restraining recovery.

The group's report – An Ireland that Works – sets out its priorities for the next phase of the State's economic recovery.

Ibec's director of business representation, Mary Rose Burke, said the organisation was not calling for a give-away budget but was seeking "targeted, evidence-based decision-making that addresses the obvious blockages". She said if the right decisions were made, the economy could grow by 3-4 per cent for the next decade.

Higher tax band
One of Ibec's key demands was to have the entry point at which workers hit the higher band of tax increased. "The big thing we need to see is the change from the lower tax rate to the marginal one being moved upwards so that people that are working can benefit."

Ms Burke said Ibec was seeking to have the top rate of tax reduced below “the psychologically important” 50 per cent level.

Another priority was to have Government spending on infrastructure increased to 4 per cent of gross domestic product by 2020. She noted about 70 per cent of the reduction in public expenditure during the crisis had been achieved from the public capital programme.

“We have fallen way down the list in the OECD in terms of public investment in infrastructure and, while we were quite high during the boom years, that was really only playing catch because of years of underinvestment. Capital expenditure must be ramped up again. . .” As part of this, she said the State needed a more balanced spatial strategy that addressed the two-tier nature of recovery between Dublin and the rest of the State.

Better government and better regulation were key to economic growth, Ms Burke said.

Regulatory regime
However, there were still gross inefficiencies in the regulatory regime here. She said applying for an Environmental Protection Agency licence can take three years. "This is a nonsense, and makes us extremely uncompetitive when competing with other countries for multinational business."

Ibec’s report claimed Ireland did not produce enough start-up firms and needed more tax-based investment schemes.