SFA director urges Cowen to cut VAT rates in December’s budget

THE Small Firms Association (SFA) has urged Brian Cowen to cut VAT rates in December’s budget.

The association says businesses in Ireland face some of the highest indirect tax rates in Europe and this is hitting the competitiveness of firms.

In its winter economic statement, the SFA said that while Ireland enjoys low rates of personal and corporation tax, we top the European Union league insofar as high rates of indirect taxation are concerned.

Ireland currently has the highest reduced rate of VAT, at 13.5%, and the third-highest standard rate of VAT, at 21%, being surpassed only by Sweden and Denmark at 25% and Finland at 22%, in the EU.

This high level of indirect taxes is compounded by Vehicle Registration Tax of up to 30% on new cars. There is also stamp duty of up to 9% on residential and commercial property and a 2% stamp duty on insurance premiums, at a time when companies are under enormous pressure from the costs associated with doing business in Ireland.

SFA director Pat Delaney said there should be no increases in excise duties or indirect taxes in the forthcoming budget and urges the Government to commit to lowering the VAT rate, which is significantly out of line with competitor countries.

Although broadly positive on the outlook for the economy, Mr Delaney said many firms in the manufacturing sector are under pressure.

“The expected annualised loss of 10,000 manufacturing jobs in 2005 will bring the cumulative total of job losses in the sector beyond 40,000 since 2002. Furthermore, notified redundancies throughout the economy in the year to date suggest the annual figure for 2005 will be in the region of 25,000. This level of redundancies will undermine much of the positive effect of job creation in the private sector, which we expect to be in the region of 61,000.”

He said December’s budget must strike a balance between social needs and economic responsibility.

“Our challenges in relation to childcare, health, education, housing, infrastructure and planning are even more pressing now that we know that we can create the resources to tackle and overcome them. However, resources are only one aspect of the problem.

“While the Minister for Finance must display the political and social courage to solve our problems in relation to childcare, health, education, housing and local authoritiy services, the necessary solutions will not be achieved simply by cheque book economics.”

He cited the health service, where the budget has risen from €3.6 billion to €11bn, but delivery of improved services was not demonstrated.