IBEC, the group that represents Irish business, said that November Exchequer Return figures published today show that the economy will reach its deficit target this year, despite a weaker than expected tax performance in November. The Exchequer figures show VAT has performed relatively strongly this year while the weakness in income taxes is likely to be more reflective of the domestic economy performance in 2011 rather than in 2012.
Reacting to the Exchequer Returns for November IBEC Chief Economist Fergal O'Brien said: "The tax returns for the crucial month of November are somewhat disappointing. VAT returns have held up well this year and are consistent with some tentative signs that spending in the domestic economy is stabilising, particularly in recent months. The income tax receipts for November, however, are weaker than expected, but are likely to be more reflective of self-employed incomes in 2011 rather than the 2012 performance (in November the self-employed submit final tax returns for 2011 and preliminary tax returns for 2012). We know from recent CSO data that private sector employment is growing again, but the latest tax returns show that last year was a tough one for the self-employed."
In advance of tomorrow's Budget IBEC called for new initiatives to tackle the unemployment crisis and warned that any increase in labour costs, through either a PRSI increase or by pushing more sick pay costs onto employers, would cost jobs and ultimately result in net losses to the Exchequer.
Mr O'Brien said: "The planned €3.5 billion adjustment is about right, but it needs to be done in way least damaging to growth and job creation.The focus must be on cutting expenditure not raising taxes. Additional taxes on work should be avoided at all costs. The domestic economy remains very weak and unemployment is at crisis levels. It is vital that tomorrow's Budget does not further depress the economy and undermine the recovery.
"Any increase in labour costs will make companies less likely to take on new staff and will push already struggling firms out of business. We desperately need to create new jobs, raising tax on work is the last thing we need. Research from the OECD shows that an increase in taxes on labour of 1% reduces an economy's employment rate by about 0.4%. The Government's proposal for an extra tax on jobs through a statutory sick pay scheme would cost at least 3,500 jobs both directly and indirectly in the economy. Any hike in PRSI would have a similar negative effect," said Mr O'Brien.
"Despite the country's constrained finances, IBEC said that a package of measures to support growth, which involves no net additional cost to the Exchequer, must be introduced alongside steps to raise revenue and cut expenditure."
- IBEC Budget 2013 Submission - low res.pdf - 635 Kbytes