Business lobbying group Ibec has called on the Government to reduce the growth of public expenditure in an effort to reduce the State’s reliance on “volatile” corporate profit tax receipts.
The lobbying group said the positive status of the State’s headline economic markers are largely funded by corporate tax, which its chief economist Gerard Brady said could be “volatile” over the coming years.
Ibec suggested a maximum net spend on budget day of €3 billion, with increased exchequer spending offset by fiscal drag and €1.3 billion made up of commitments under the National Development Plan.
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Ibec pointed to figures showing that, should Ireland collect a level of corporate profit tax comparable to similar economies, every worker in the country would have to pay an additional €4,000 in taxes to make up the State’s current tax revenue.
In light of the reliance of the State’s balance sheet on corporation tax, Ibec called for the Government to rein in spending increases in the coming budgets to “return to a balance of income over expenditure, were our corporate tax receipts to be realigned with other mid-sized globalised economies”.
The lobbying group said the gap stands at around €5 billion, and Mr Brady noted that recent US policy is adding to the economy’s exposure to volatility with the State at risk of being left “very short” on tax receipts should that risk materialise.
Mr Brady said the Government could “correct, fairly painlessly, the underlying budget deficit” over a number of years and would avoid “more painful” measures in the future.
He said the business community’s biggest concern is of a “sharp correction” in Government policy should that “volatility be materialised”.
Asked whether it supported Government indications that cost-of-living measures would not be needed in the Budget, Fergal O’Brien, Ibec’s head of lobbying and influence, said the group was against “universal supports”.
“We shouldn’t be doing across-the-board, universal supports – it is just really bad economic policy,” Mr O’Brien said, urging the State to target distressed households and reduce the cost of business.
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Ibec also called for “targeted supports” for industries hardest hit by US import tariffs, such as the the spirits industry, where Ibec noted more than 90 per cent of distilleries had paused or cut back production.
Mr Brady said that some sectors would be placed under “existential pressure” should the level of tariffs rest at 20 or 30 per cent.
The lobbying group noted that their members have been “very vocal” in raising “a lot of concerns” about the EU’s countermeasures in response to US tariffs.
One measure Ibec suggested to reduce costs to businesses and households is reducing the fixed cost component on Irish energy bills through a “strategic annual subvention”. The group also suggested indexing the top tax band and income tax credits to wage growth at a cost of €440 million and €240 million respectively.
Amid economic turmoil, Ibec called on the Government not to reduce infrastructural spending, and to introduce a set of spending targets in the upcoming 2026-2029 medium-term fiscal plan.
These include a fiscal investment target of 5 per cent of gross national income (GNI), and working towards increasing public investment in research and innovation to 1 per cent of GNI by 2035.
To encourage homebuilding, Ibec called for the reduction of VAT to 5 per cent and the removal of Government levies on new-build apartments – which it said would “improve the viability of apartment building”.
