Thursday 24 May 2018

'Don't raise training levy in Budget'

(stock image)
(stock image)
Katherine Donnelly

Katherine Donnelly

Employers face a hike in payroll taxes to fund universities within weeks, despite being promised a review of the levy that has yet to start.

Employers' body Ibec says the Government should drop its plan to increase payroll taxes in next month's Budget to help fund higher education.

Ministers have been paving the way for a hike in what employers pay to the National Training Fund (NTF) next year, but Ibec says no action should be taken pending completion of a review of the operation of fund, which is used to address skills needs in the economy,

As part of its strategy for seeking a higher contribution from employers, the Government committed to an independent review of the NTF in July - but with less than two weeks to go to the Budget the review has not yet started.

A spokesperson for Education Minister Richard Bruton told the Irish Independent that the matter was "currently out to tender."

The NTF collects about €400m a year from employers. Government wants to boost that to about €600m by 2020, on a phased basis, starting on 2018.

Ibec Head of Education and Social Policy Tony Donohoe said employers are "deeply concerned by the funding crisis in higher education which seriously threatened quality within the system".

But, they regard the levy increase "as an inadequate short-term fix due to the lack of a credible and more sustainable solution", he added.

The levy currently amounts to 0.7pc of reckonable earnings of about 75pc of all insured workers. It is collected as part of Employers' PRSI, and the plan is to increase the rate to 1pc.

The Government proposal involves creation of a new Exchequer-Employer Investment Mechanism, to operate from 2018 onwards.

Mr Donohoe said that international experience emphasised the importance of not relying on a single source of funding for higher education and that the State, individuals and employers all had a role to play.

"Therefore, this should be addressed by a combination of increased exchequer funding, an effective student-contribution supported by income contingent loans and employer supported upskilling programmes."

He warned that, given the challenges posed by Brexit and the related economic uncertainty, an increase in employment taxation would have an adverse impact on Ireland's competitiveness.

Ibec's Donohoe said an alternative approach to a levy increase would deliver the same result more effectively, suggesting that a portion of corporate tax gains should be used.

"Given the scale of corporate tax receipts, this is a more viable and sustainable approach," he said.

Mr Donohoe said while the higher education funding crisis had provided the impetus for the proposed level increase, "it has also raised serious issues around how the €400m already collected through the levy is spent".

The Ibec executive noted the announcement in July of a review of the NTF to address business concerns about what it was is delivering and how it responded to skills needs and said "this review should be completed before any further action is taken".

Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business