Cork Chamber: Cut Capital Gains Tax to 25% to stimulate economy

Restoring air connectivity is one of Cork Chamber's Budget priorities

Seamus Downey, of EY, chair of the Cork Chamber budget committee, with chamber president, Paula Cogan, launching their pre-budget submission. Picture: Darragh Kane

Cork Chamber said the government must extend the Employment Wage Subsidy Scheme (EWSS) beyond March 2021 and implement a temporary reduction in Capital Gains Tax to stimulate economic activity.

Publishing its pre-budget submission the Chamber said Budget 2021 must be about securing Ireland's economic resilience through infrastructural investment and finessing the pandemic supports and tax measures.

Other recommendations include an increase of the tax-free voucher limit to €1,000 and a temporary reduction in employer PRSI to 5.5% to stimulate job creation and retention.

Chamber President Paula Cogan also said that support for Cork Airport was vital along with a commitment to accelerate major infrastructure projects for the region.

“To provide continuity to construction and to move beyond the legacy of the last recession, significant moves must be made to drive on and accelerate key projects such as the Cork Metropolitan Area Strategic Plan, the National Broadband Plan and Renewable Electricity Subsidy Scheme, which will set the scene for new ways of mobility, communication and energy that are fit to drive a modern economy," she said.

"To keep our region open for business, there must be commitment to invest in capital projects and marketing for Cork Airport. Local spend in hospitality and retail can also be enhanced by boosting the tax free voucher system from €500 to €1,000.”

The Chamber said it was essential that revised EU guidelines on air travel are implemented immediately to begin the recovery of the region's international connectivity.

The Government has agreed to implement the European traffic light system that should allow travel between EU countries without the need to restrict movements after landing.

"The European Commission has now set a clear direction for commonality of approach to travel between member states. The Irish Government must be supportive as this proposal moves to the European Council and push for equivalent international agreements to be progressed with urgency," the submission states.

Chair of the Cork Chamber Budget Committee, Seamus Downey of EY said extending the EWSS beyond March 2021 will be absolutely essential to the revival of businesses beyond the first quarter of next year.

"The criteria must be reviewed to ensure that businesses and jobs are not lost unnecessarily between now and then. It must be remembered that keeping the economy going will be our best route to recovery.” 

The Chamber said the scheme should be further adjusted as businesses that see a good month will then be omitted from the scheme. 

"They should be able to opt back in. For example, some businesses could see a Christmas uplift followed by a devastating Q1," the Chamber said.

The submission also recommends the introduction of a temporary time-bound reduced rate of employer PRSI across the board of 5.5%.

"This would generate savings for employers in terms of managing costs. It would place focus on retaining the employer/employee relationship as redundancy must be the last resort as it creates personal and social strain and generates increased social welfare costs."

Mr Downey said there is a window of opportunity, through a temporary reduction of Capital Gains Tax to 25% to stimulate economic activity. 

"The last significant reduction in CGT led to a 36% increase in yield and in the current circumstance, a reduction could bring similar value."

On infrastructure, Cork Chamber said the Cork Metropolitan Area Transport Strategy must be supported robustly and with delivery-focused urgency via a Cork focused team. They said progress was also needed on the M28 Ringaskiddy motorway plan and the M20 Cork to Limerick project.

"Support must be maintained and potentially enhanced for the Cork Event Centre and new impetus put behind the project which is needed now more than ever," they said.

Cork Chamber said that at a time of growing international protectionism, it was important to make targeted changes to our own national tax system but said Ireland must maintain the 12.5% Corporate Tax Rate which it said offers businesses certainty in the face of global changes.

"There are many ways to achieve economic stability despite the major challenges posed by this pandemic and we have a stable tax base and international rating from which to do so," Mr Downey said.

"Countercyclical spend on infrastructure, a laser-sharp focus on ensuring that existing supports work and a blend of tax-related measures to stimulate economic activity is a recipe that will hold us in good stead.