Fall in tax take may hit growth

Conor Keane, Finance Editor

It said the underlying trends in the most recent exchequer returns provided a sharp dose of reality regarding our continued economic growth.

CPA president Michael F Dolan said an analysis of the composition of tax revenue for the first seven months of the year (to end July 2005) showed that over two thirds of tax growth has come from increased VAT and, when added to growth from excise and stamp duty, these combined account for nearly all revenue growth.

“What this means is that the economy is now becoming very reliant on expenditure taxes and expenditure taxes require growth in real incomes and profits to be sustained.

“However the sharp decline in Corporation Tax, which has declined by 463 million, or 18% year on year, suggests a slow-down in business sector growth which will impact on our ability to deliver future income growth and future expenditure tax receipts,” he said.

Mr Dolan believes there is a need for government to analyse the reasons for the sharp decline in corporation tax.

“The seeds of a sharp dose of reality are in these figures and Government should recognise and address the issues involved before it is too late. There is a serious question mark over the level of regulation and its impact on Irish business growth,” he said.

Mr Dolan believes that while we need to protect our reputation as being a good place to do business, he wonders if entrepreneurship and business growth is being stifled as a result of over-legislation.

“Evidence is beginning to emerge that this may be the case. For example, the burdens now being placed on company directors has led many to question whether it is worthwhile to undertake such a role.

“We urge the Government to review the impact excessive regulation is having on corporate performance,” he said.