IBEC calls for €700m tax cuts in next Budget

The Republic's biggest business organisation wants the next minister for finance to keep a lid on day-to-day Government spending and to deliver personal tax cuts worth €700 million in his first budget.

The Irish Business and Employers' Confederation (IBEC) yesterday published its pre-budget submission, ahead of the appointment of a successor to the Minister for Finance, Mr McCreevy, in tomorrow's Cabinet reshuffle, expected to be Mr Brian Cowen.

IBEC's director of economic policy, Mr Brian Geoghegan, said the group favoured increasing the standard, 20 per cent tax band by €5,000.

He argued that this would compensate taxpayers for the fact that the bands have not been indexed to pay increases over the past two years, which has in turn left people on average incomes paying the higher, 42 per cent tax rate. IBEC wants the tax bands and personal tax credits increased to take pay rises into account this year.

IBEC is also calling for tax credits for receipted childcare costs. Mr Turlough O'Sullivan, its director-general, said that since female participation in the State's workforce had reached the same level as in the rest of the EU, childcare had become a "major issue" for the organisation's members. IBEC estimates that its personal tax package would cost the Exchequer €700 million.

At a macro level, the document warns against a "populist high-spending over-reaction" to the criticism of public service delivery that the Government endured during this year's elections.

The document points out that, while the Exchequer will be €1.1 billion better off than expected at the end of year, this will be partly due to one-off gains from Revenue Commissioners' investigations and a record-breaking year for housebuilding, neither of which will be repeated. It urges that day-to-day spending should be tightly controlled in 2005.

Launching the submission yesterday, Mr O'Sullivan said that throwing money at public service problems would not necessarily solve them. The document points out that day-to-day spending increased by €11 billion between 2000 and 2003. At the same time, it grew from 25 per cent of gross national product (GNP) to 30 per cent, with "no corresponding improvement in public services".

IBEC wants the Government to focus on public service reform instead of on increased spending. It is maintaining its call for a 10,000 cut in the number of public service jobs.

IBEC also wants the new minister to avoid inflationary measures and to focus on competitiveness.

Mr O'Sullivan pointed out yesterday that the Council on Competitiveness recently published figures showing that average prices have risen 22 per cent relative to our trading partners over the past four years.

At the same time, employers' wage costs have doubled and non-pay expenses have increased by 30 per cent.

"Ireland has become a very very expensive place to live and work," Mr O'Sullivan said.

The submission also calls for increased spending on infrastructure in waste management and transport, and a reduction in taxes on alcohol, which IBEC says have failed to raise their projected revenues because they have resulted in falling sales.