The Irish Business and Employers Confederation (IBEC) added its voice to the public service unions yesterday in calling for tax cuts in the forthcoming budget to be aimed at the lower paid, but warning against public service pay demands which exceed the national pay agreements.
IBEC said in its pre-Budget submission, "Keeping the Circle Virtuous", that increasing personal allowances provided the greatest proportionate gain to the lower paid and was not inflationary.
"A critical part of the equation is that the Government must stand very firm on public service pay. The terms of Partnership 2000 must not be exceeded," Mr Richard Burrows, IBEC president, said. While the Partnership 2000 commitments on employment taxation and social inclusion had been met, "there is scope in the 1999 Budget for a series of tax/ expenditure measures aimed at improving flexibility and mobility in the labour market". Mr John Dunne, IBEC director general, agreed that there was a general focus towards the lower paid, but added that there were "clear difference in relation to clawback".
The Budget had to be cautious at a time when many markets for American companies located in Ireland were in turmoil. The submission stated that personal allowances should be doubled to £1,200, and the standard tax rate band should be index-linked to make it inflation-proof. IBEC gives a full year costing of these measures, together with other tax reliefs and allowances, at £340 million.
"We believe that only 20 per cent of taxpayers should be charged at the higher rate [currently 46 per cent] and that a reduction in both the standard [currently 24 per cent] and top tax rates over the medium term will be required, the aim being to achieve rates of 20 per cent and 40 per cent," IBEC said. The social partner prices its business taxation proposals over the full year at £110 million. These include reducing the standard corporation tax rate for service companies immediately, from 32 per cent to 28 per cent, and introducing childcare initiatives and incentives for companies investing in energy efficient technologies.
IBEC pointed to rising house prices as a manifestation of "the infrastructure deficit" which may contribute to a reduction in competitiveness and an undermining of the social consensus unless supply-side action is taken.
Current excess revenues should be "banked" in an Economic Infrastructure Fund. "This would make prudent use of the surpluses brought about by these current exceptional growth rates and also ensure that there would be no hiatus in essential infrastructure projects as a result of reduced structural funds or the constraints of the Growth and Stability Pact." It said that the tightening labour market is a concern and argued that a Government approach that is "socially sound is economically wise", adding that businesses providing childcare facilities should receive capital allowances.
IBEC is also calling for social welfare increases for the elderly and the handicapped within a policy focus of "a more active and conditional approach to eligibility for benefit".
