Retail sales up as sector calls for tax cuts in budget

PRSI rates for employers should be reduced to help offset a proposed rise in the minimum wage and to provide a boost to the retail sector which is finally experiencing an upturn in fortunes, Retail Ireland has said.

The Ibec representative body has reported positive trends in the second quarter of 2015 and says momentum can be sustained with key decisions in the forthcoming budget.

Tax cuts, together with supportive initiatives for online and urban retail trade, would bolster a sector that has witnessed resurgence in consumer confidence reflected in a recently returned willingness to “make larger purchases”.

Future success

Retail sales rose 2.3 per cent in the year to the end of June and are 2.8 per cent ahead of the same period last year, although still lagging 14 per cent behind the pre-crash economy, the Retail Ireland Monitor reported for the second quarter.

"A full recovery is a long way off. Future success is contingent on Government making the right budgetary and policy decisions now," said director Thomas Burke.

For the retail lobby, the “right decisions” would include a 1 per cent cut in the marginal rate of tax and its entry point lifted to €1,500 for a single person with a corresponding rate for married couples. Add to that a €100 increase in personal tax credits and the result would be an “increase in spending power across the economy”.

“The current high [marginal] rate discourages the uptake of overtime work and limits the opportunity for productivity gains in a highly labour-intensive environment such as retail,” it said. It also appealed for income tax cuts not to be funded through hikes in other areas such as excise duties and VAT.

It also wants a reinstatement of the 4.25 per cent PRSI rate for employers, introduced in 2011 and reversed in Budget 2014. This is "particularly important" in light of the recommendation of the Low Pay Commission to increase the national minimum wage by 50 cent.

‘Very unwelcome’

“The recommendation for a 6 per cent increase was premature and very unwelcome,” it said. “A rise will heap additional pressure on many retailers that have only just managed to put costs onto a sustainable footing.”

There are also appeals for measures to bolster Ireland’s virtual retail trade by allowing web development costs to be offset against VAT. A pilot scheme to allow towns and cities access regeneration and development funds, with the oversight of managers, is also suggested.

The retail sector is looking to consolidate gains it has already made in the first half of 2015, during which time, it says, the “fortunes of retail are finally on the up”.