Wednesday 13 December 2017

Drop plan for €500m tax increase in Budget, says new IBEC chief

Sarah McCabe

Sarah McCabe

Newly elected Ibec president John Kennedy called on the Government to reduce the planned €3.1bn budgetary adjustment by dropping €500m of proposed tax hikes. The head of Diaego's Irish operations told guest of honour Enda Kenny that "we have hit a tax ceiling".

Mr Kennedy told the Taoiseach that reducing planned cuts from €3.1bn to €2.6bn in 2014 will not prevent the State from reaching its Budget deficit target of 3pc next year.

"Recent tax rises have undermined demand in the domestic economy," the head of Diageo's Western European operations said. "We have hit a tax ceiling. There is increasing evidence that further tax increases are likely to result in less revenue for the State, not more."

Speaking at IBEC's annual President's Dinner in Dublin last night, Mr Kennedy said that poor VAT returns were a sign that austerity must end. "VAT receipts are not hitting targets and last year's significant excise hike has not delivered the anticipated return. A clear signal is needed that the end of austerity is in sight. Plans to further increase tax by €500m should be dropped," he said.

The request has been made before by the organisation, but now looks more realistic following indications from Tanaiste Eamon Gilmore that the Government may not follow through on all €3.1bn worth of cuts due in 2014 under targets agreed with the troika.

In a recent interview with the 'Financial Times', Mr Gilmore controversially said that the full €3.1bn austerity package was not necessary to enable Ireland to meet its deficit target of 3pc of gross domestic product by 2015. "We will not let the Irish economy become some type of economic experiment for austerity hawks," he added.

IBEC's other budget "asks" include a roll-over of the special 9pc VAT rate for the hospitality sector. Transport Minister Leo Varadkar has publicly expressed his support for this, but a recent speech by Finance Minister Michael Noonan appeared to rule it out.

The business body has also asked the Government to ensure that labour costs do not rise.

Irish Independent

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