Economy

Isme seeks change to way minimum wage is calculated

Small business lobby group seeks cut in VAT but higher PRSI for workers in pre-budget submission

Small business lobby group Isme has accused the Government of bring 'dismissive' of the 'strategic importance of the SME sector'. Photograph: iStock

Ciara O'Brien
Tue Jun 4 2024 - 11:47

A cut in VAT rates, higher PRSI charges for workers and a change in how the national minimum wage is calculated are all on small business lobby group Isme’s Budget 2025 wish list.

Publishing its pre-budget submission, the group accused the Government of being “dismissive” of the “strategic importance of the SME sector”, and called for more influence in bodies responsible for setting labour policies.

Isme said there should be a change to how the minimum wage is calculated to take account of Ireland’s “unique” business demographics, and that future increases should not exceed the inflation rate.

It is also seeking an expansion of the “rainy day” fund and a policy review of the interaction between indigenous enterprise and the multinational sector in Ireland, with the former setting tax policy.

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The group has also proposed a reduced VAT rate of 9 per cent and said the standard rate should be cut to 21 per cent, it said.

PRSI should be charged at 2 per cent on all income up to €424 per week, rising to 6 per cent on everything above that level, its said. Alongside proposed change to the capital gains tax regime, this would help to add €1.4 billion to the State’s coffers, it said.

Workers currently pay no PRSI if their weekly income is below €352 a week. If it is higher, they pay 4 per cent on the full amount. Isme says Irish workers pay some of the lowest social insurance contributions in Europe.

“There is a relatively benign fiscal situation at this time which means the Government can make strategic choices, rather than have budgetary decisions forced on them by circumstance. This provides plenty of opportunity to make the right decisions and choices,” said Isme chief executive Neil McDonnell.

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“A fundamental requirement of Isme and the SME sector overall is that the State engages formally with Ireland’s SME sector in the same way it does the multinational, semi-State and public sectors. There is a lot of lip service by the political parties that make up the Government, but in practice there is nothing of substance. The recent supports announced are more to do with political expediency than strategic engagement.”

The Government should intervene in the rental market, Isme said, using the tax and regulatory regime to boost the supply of private rented accommodation, and increase the supply of new homes being built. The group is also seeking economic incentives to spur the transition to greener choices.

Ciara O'Brien

Ciara O'Brien

Ciara O'Brien is an Irish Times business and technology journalist

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