Business reaction to budget measures mixed

Moves to boost construction and hospitality welcomed while excise increases criticised

ISME chief executive Mark Fielding said today’s budget would go some way towards helping Ireland to regain its competitiveness. Photograph: Frank Miller/The Irish Times

ISME chief executive Mark Fielding said today’s budget would go some way towards helping Ireland to regain its competitiveness. Photograph: Frank Miller/The Irish Times

 

Reaction from the business community to today’s budget was mixed.

The retention of the 9 per cent VAT rate for the hospitality sector was broadly welcomed by bodies such as Fáilte Ireland and the Irish Hotels Federation, who said the move would help to secure existing jobs in the industry and create new ones.

“Maintaining competitiveness is the single most important determinant of tourism success, and these decisions allow the industry to plan forward with confidence that the nascent recovery in tourism can be consolidated, and more jobs created,” said chairman of the Irish Tourist Industry Confederation Paul Carty.

Measures to boost the construction industry were also well received.

The Construction Industry Federation said the Government had announced several measures which would boost jobs, including the €200 million stimulus package for capital projects from the lottery licence, a €30 million State house building programme, and a €10 million fund for unfinished housing estate initiatives.

“The foundations for the recovery of our industry have been set in this budget and this will help bring extra confidence, extra activity and most importantly, more construction jobs to our sector,” CIF director general Tom Parlon said.

The Society of Chartered Surveyors in Ireland welcomed the tax incentive which would allow homeowners to reclaim VAT on completed renovation jobs worth between €5,000 and €30,000, saying it would support legitimate businesses in the construction sector and help to improve standards.

The Irish Small and Medium Enterprises Association (ISME) were critical of the €5,000 minimum spend, however, saying it would “continue the nixer culture below that level”.

Criticism

One of the most widely criticised measures introduced in Budget 2014 was the increase in excise duty on alcohol and tobacco products.

Alcohol Beverage Federation of Ireland said the second consecutive year of excise increases on beer, wine and spirits “will be bad for jobs, bad for growth, and will damage an important domestic sector”.

ABFI director Kathryn D’Arcy described the increase as a “short-sighted” move which would damage employment in several industries.

“The effects of an 18 per cent increase in excise on beer will be felt by Irish farmers; the 15 per cent increase in excise on spirits will damage Ireland’s export sector; and the 15 per cent increase in excise on wine will be damage our international competitiveness as a tourism location,” she said.

While the lower VAT rate will have a positive impact on publicans, the excise increase on alcohol could lead to pub closures and the loss of up to 2,000 jobs across the country, according to the Licensed Vintners Association chief executive Donal O’Keeffe.

“This increase flies in the face of the Government’s stated objective of stabilising the domestic economy and promoting jobs and growth,” he said. “This move will have precisely the opposite effect on the pub sector. It is the second successive Budget we have seen a substantial excise hike in an environment where the pub sector is under huge pressure.”

He said that while retail sales had fallen 12.5 per cent across the board over the past six years, the pub trade had seen a decline of 33 per cent, and publicans “cannot understand why excise rates are being hiked again”.

The Irish Wine Association said Irish consumers will now pay €4.78 in excise and VAT on an €8 bottle of wine as a result of today’s announcement.

Chairman of the association Michael Foley said the move would put further pressure on an industry already decimated after last year’s excise increase.

“If we continue the trend of having the highest wine excise in Europe, we run the risk of a return to cross-border shopping as well as negatively impacting consumer confidence and tourism and inevitably causing job losses,” he said.

Retail Excellence Ireland said the increase in the tobacco licensing fee from €50 to €500 per year would “damage smaller convenience store retailers who have already suffered an exponential decrease in [TOBACCO]sales”, according to REI chief executive David Fitzsimons.

“The illicit trader will be delighted with this intervention,” he added.

Mr Fitzsimons also criticised the increase in the pharmacy dispensing fee from €1.50 to €2.50, saying it would lead medical card patients to forgo their prescribed drugs, which would have a negative impact on the health service over time.

Small business

ISME “cautiously welcomed” other incentives aimed at assisting smaller enterprises, including a €500 million package of tax reliefs for new businesses, saying such measures would go some way towards helping Ireland to regain its competitiveness.

Chief executive Mark Fielding welcomed cuts to social welfare, saying it was necessary to make savings and discourage people from remaining on the dole, but that “much more must be done to reform the out-of-date system to make it fit-for-purpose”.

The increase in DIRT tax will discourage people from saving which might have a positive impact on retail sales, but “it will take more than this to instill consumer confidence and get the till ringing in Irish shops”, he said.

The association was especially critical of the increase in the number of sick pay days employers must pay for from three to six, saying the move “will put extra pressure on already struggling SMEs and their staff”.

The Institute of Certified Public Accountants in Ireland welcomed the pro-business measures announced in the budget, saying it marked a “deliberate attempt to support entrepreneurs and stimulate innovation”.

Chief executive Eamonn Siggins said the R&D tax credit and an increase in the VAT cash accounting threshold from €1.25 million to €2 million would “constitute significant support for small and medium enterprises by improving cash flow, fostering innovation and supporting entrepreneurship”.

The Irish Software Association (ISA), the Ibec representative body for over 160 Irish software and digital technology companies, has welcomed the capital gains tax relief incentive, which applies to entrepreneurs who reinvest asset sale proceeds in new ventures.

ISA chair Edel Creely said the measure would “encourage continued entrepreneurship in the tech sector and incentivise job creation and innovation”.

The extension of the Section 481 tax incentive to non-EU talent working in the film, television and animation industry was welcomed by Irish Film Board chief executive James Hickey, who said the measure would assist Irish producers to attract more foreign direct investment from international feature films and television shows.