TAX: While employers regret the levy on banks and the end of capital allowances for hotels, they believe everybody should feel the pinch if the gap between what is spent and earned is to be bridged, writes Arthur Beesley

Banks bore the brunt of the Budget costs on business, but employers group IBEC said the measures introduced by the Government were "much less severe" than expected. Taken together, the Budget measures on business are projected to release additional payments of some €527 million into the Exchequer next year.

But this sum reduces to about €222 million when the reduction in corporation tax to 12.5 per cent from 16 per cent at the start of the year is taken into accounts. The Government is proceeding with the reduction in a measure which will cost the Exchequer some €305 million in a full year.

While IBEC regretted the levy on banks and the termination of capital allowances for hotels, it said everybody had to feel the pinch if the gap between what was spent and earned was to be bridged. The business lobby's director general, Mr Turlough O'Sullivan, said the Government had taken a firm stand in respect of public spending.

He said: "If such an approach had been taken over the last two years, the challenge facing all of us today would have been easier. I think it's a much less severe Budget than most people expected."

But the Irish Small and Medium Enterprises association said the Budget represented a "victory for wealth distribution over wealth creation". "The decision to increase excise duties particularly on diesel is deplorable and will further add to business costs," said the group.

In addition, the Small Firms Association said the Budget contained no incentive to create jobs. Said the chairman of the association, Mr Kieran Crowley: "This Budget taxes work, it taxes technology, it taxes investment in job creation and it taxes new homes."

Mr Crowley also criticised the one-point increase in the lower VAT rate to 13.5 per cent. He also said it appeared that the Government had accepted that inflation was "not worth the battle". "This is the rock on which the Irish economy will perish," he said.

Payment of corporation tax will be brought forward by up to four months for firms whose accounting period ends after January 1st next. The new pay and file system will require firms to submit the balance of corporation tax within nine months after the end of their accounting periods. This will yield some €16 million in a full year.

In addition, the Government has changed the dates for the payment of capital gains tax. In a measure estimated to yield €250 million next year, payment of capital gains tax on disposals up to the end of September in a given year will be required by the end of October. Payment of the tax on disposals between October and the end of December will be required by February the following year.

The Minister for Finance, Mr McCreevy, also extended by three years the period for capital allowances on plant and motor vehicles.

This will provide €20 million for the Government next year, but the yield will rise significantly in following years, with payment of €1.3 billion projected by 2010. Such a sum contrasts with the levy on banks which will yield €300 million in the next three years.

The Government is also increasing stamp duty on commercial property, bringing the maximum rate from 6 per cent to 9 per cent, the same as for residential property. This will yield €118.5 million next year and €158 million in a full year.

Mr McCreevy also changed the qualifying dates for five tax incentive schemes. These included the film relief scheme and the urban renewal scheme although no projected revenues for the changes was outlined in the Budget document. By ending the capital allowance scheme for hotels, the Government expects to realise €3 million next year as existing schemes wind down, and €30 million in a full year.