The Government should tear up any existing budget proposals and prepare a bold new plan that meets the threat from Brexit head on, according to Ibec.
Speaking prior to the lobby group's launch of its Budget 2017 submission, Ibec's director of policy Fergal O'Brien told The Irish Times that Ireland could not afford a "business as usual" budget.
“Brexit is a potential major crisis for the Irish economy and we cannot be complacent about it. We need to see a reaction from the Government. We need to see a competitive response.”
Mr O’Brien said the British government had begun to compete more aggressively with Ireland on tax in recent years and would likely continue to do so, noting former chancellor of the exchequer George Osborne’s recent proposal to cut corporation tax in the UK to 15 per cent.
Acid test
Describing Budget 2017 as an “acid test for the Government”, Mr O’Brien said the British government had thrown down the gauntlet on its business tax ambitions. Ireland must respond by repositioning itself as a “nimble, dynamic, pro-business and pro-entrepreneurship economy”.
In its submission Ibec has outlined detailed proposals to reform business and personal tax offerings to make Ireland a more attractive location for highly-skilled workers and entrepreneurs.
Proposed measures include improving the treatment of capital gains relative to the UK, extending the earned income tax credit for the self-employed, introducing a seed enterprise investment scheme, and providing companies with an option to claim the R&D tax credit at 37.5 per cent “above the line”.
Ibec said sterling’s collapse was squeezing exporters, which it said must be met by focusing on keeping costs under control, including labour costs.
“It would be daft in the circumstances to have an increase in the minimum wage given that it would impact on all of the sectors most likely to be hit by Brexit, such as retail and tourism,” said Mr O’Brien.
Moving operations
He warned that unless significant changes were introduced to make Ireland a more compelling place to invest, many Irish-owned businesses could consider moving their operations to the UK.
“Ireland may be an attractive location for large multinationals, but for indigenous enterprises it is not a good place to be.”
The business group said, despite the heightened uncertainty of Brexit, the Government should not deviate from plans for a modestly expansionary budget that should include making an additional €1 billion outside the current fiscal rules available for social housing.
Ibec also called for more cash to be spent on transport, education and broadband.
“This can’t be a ‘business as usual’ budget. If it is then we’re going to find ourselves in trouble,” said Mr O’Brien.
“The risk is that, given the minority government structure, we could end up in paralysis. It is important, therefore, that all the political parties come together and recognise the scale of the problems posed by Brexit, and that this is reflected in Budget 2017.”
