IBEC, the employers' organisation, is calling for major tax reductions for business in the December Budget. Chief among its demands are that the standard corporation tax rate should be cut from 36 per cent to 30 per cent.
This would cost £130 million in a full year, it claims in a pre-Budget submission published yesterday.
It also calls for the standard rate for all companies to be reduced to 10 per cent by 2005. The Budget should reduce the lower corporation rate of 28 per cent to 25 per cent and the threshold on which the tax is paid should be increased from the first £50,000 to the first £100,000 of profits. These measures would cost £30 million in a full year, it says.
IBEC argues that these measures can, in the short term, be funded through revenue buoyancy, and in the long term, through an increased level of economic activity.
"A lower standard level of corporation tax will increase investment, as extra funds are released for this purpose, as well as provide an important boost to the employment-intensive service sector," it says. IBEC says a significant reduction is urgently needed, as the rate of corporation tax in Britain was also cut from 33 per cent to 31 per cent and back-dated to last April and the British rate for smaller companies was cut from 23 per cent to 21 per cent.
The organisation is calling for the standard rate of VAT to be reduced from 21 per cent to 19 per cent by 2002.
It says the late repayment of VAT by the Revenue Commissioners can cause undue financial hardship to some companies and penalties should be imposed to provide greater incentives for prompt payment and to increase the efficiency of the Revenue Commissioners.
"Interest should be added to late repayments of VAT by the Revenue Commissioners." IBEC director general Mr John Dunne said yesterday that the Budget should be formulated in a manner which sustains output and employment growth and leads to a more competitive and flexible economy.
In a statement, he said the private sector was creating the jobs, and the environment for business must be continuously improved to maintain this performance.
"Revenue buoyancy should be directed towards reducing the level of the national debt and the full implementation of the extended commitment of Partnership 2000 in terms of business taxation," he said.
The Budget should contain no change in excise duties on tobacco products, and alcohol duty should be harmonised with the British rate, particularly in the case of spirits, says IBEC. It also calls for the removal of VAT on liquefied petroleum gas.
On personal taxation, IBEC says the 48 per cent income tax band should be reduced to 45 per cent, costing £150 million a year. Personal allowances should be increased by £300 for a single person and £600 for married couples. It also wants the 26 per cent band index-linked.
The lower rate of employers' PRSI should be reduced by 0.5 per cent and the threshold increased by £2,000. This would cost £70 million in a full year. IBEC argues that lowering employers' PRSI would help to maintain existing employment and generate new jobs. Lower income tax and employers' PRSI would improve the prospects for wage moderation. It says many Irish companies find it difficult to recruit relatively unskilled people. "This problem is more directly attributable to the tax and social welfare systems and attitudes to employment than to the question of a skills shortage," it says. "Greater incentives are required for persons to enter into employment or undertake further education, particularly younger people," it says.
Improvements in unemployment payment and schemes which are justified must be accompanied by a much more active and conditional approach to determining eligibility for benefit.
"It is our belief that a lower-paid job is preferable to no job at all. "For this reason, IBEC has sought and secured acknowledgement in Partnership 2000 that unemployed persons have a responsibility to seek and accept reasonable employment development and training opportunities."
