State must cut tax and invest, says Ibec chief Danny McCoy

Business has no interest in a return to one-size-fits-all national pay agreements, the head of the employers group Ibec is expected to state today.

In a speech to be delivered to its conference of business leaders, Ibec chief executive Danny McCoy will call on the Government to further reduce income tax at the next budget and to invest heavily in infrastructure, particularly to deal with housing shortages and transport bottlenecks.

In his paper to the Ibec “Chief Executive Officers” conference in Dublin, he will say about half of companies will award pay rises this year, but many still struggle.

“This needs to be reflected in wage expectations. If costs spiral and we lose our competitive edge, we will pay for it in jobs. To boost consumer spending and increase economic activity, we should cut tax. Income tax rates are too high, are out of line internationally and are a serious disincentive to work, taking a promotion or doing overtime. We have one of the highest marginal tax rates in the OECD and it kicks in too early. It needs to be reduced as a priority.

“The decision to retain a 52 per cent higher marginal tax rate for those earning over €70,000 was short-sighted and will cost jobs and revenue.

"A single worker earning €75,000 in Ireland takes home about €6,000 less than a similar worker in the UK. This is making it difficult for business here to attract and retain skilled workers. The next budget must prioritise further cuts to the marginal rate and adjust the bands to give more money back to workers."

Self-employed

He will argue the disparity of treatment between the self-employed and PAYE workers “is another unjustified anomaly in the system that should be addressed as a priority”. In his speech, Mr McCoy will also maintain any possible future engagement between business, the Government and the unions would only have merit if it was anchored in the need to create jobs and secure competitiveness.

He will say that not all companies are recovering or growing at the same rate and some regions have yet to feel the recovery. “The economy in money terms is still about 6 per cent below its pre-crisis peak and overall price levels are still below where they were in summer 2008. This needs to be reflected in wage expectations. Many companies remain in survival mode and simply cannot afford pay rises.”

Past mistakes

Mr McCoy will say that in less than 50 years the island of Ireland will have a population of 10 million. “We must plan for significant economic and population growth. At the moment, we’re not investing nearly enough . . . We need to dramatically ramp up capital spending if we are to avoid the mistakes of the past . . .”