Over half (54%) of financial services firm would favour a “conservative and cautious” Budget this month, according to a survey from the Association of Compliance Officers of Ireland (ACOI).
The survey of almost 300 ACOI members, comprised primarily of compliance leaders employed in large financial organisations around the country, found a majority of firms would favour a conservative, cautious budget “with little change,” while 39% wanted an “expansionary” budget with tax cuts and lots of spending commitments.
Less than a tenth (7%) would be happy with a “contractionary” budget with cuts to spending and possible tax increases.
Michael Kavanagh, CEO of ACOI said the survey results reflect a “tentative outlook” amongst many firms.
“We are going into this Budget facing a huge deficit. But unlike the recession of 2008, the Government cannot use austerity as the tool with which to address the deficit caused by the pandemic,” he said.
The survey also revealed the coronavirus pandemic is the primary concern for the majority of Irish financial organisations (54%) ahead of this months budget, with 35% saying they expect Covid-19 and Brexit to have equally large impacts on their employers business this year. Just over a tenth said Brexit was their greatest concern.
Mr Kavanagh said it was “interesting” that just 11% of respondents viewed Brexit as the biggest threat: “ESRI research actually suggests that it’s unlikely the financial services sector should suffer a double blow from both COVID and Brexit – the general trends support this, in that COVID hasn’t hit this sector as badly as it has impacted others."
"However, this is a sector that could potentially be highly exposed to a hard Brexit.”
“Perhaps, based on this, firms should be cautious not to become overly focused on COVID to the detriment of their Brexit preparations. The message from Government and other experts in the area is clear - businesses need be prepared.”
“There might have been a sense, over the last few months, that Brexit was completely overshadowed by having to deal with the global pandemic. But as we have seen of late in Brexit discussions with the possible breach of the international treaty to protect the Good Friday Agreement, it is becoming increasingly apparent that Brexit poses problems to Irish trade that have not gone away, despite best negotiations.”
The ACOI survey also asked respondents whether they would support a reduction of the Capital Gains Tax (CGT) from 33% to 20%.
Almost three quarters (74%) indicated CGT rates should be reduced in the upcoming budget.
Mr Kavanagh said this points to a desire “to stimulate movement in the market.”
“We do have a precedent in Ireland for lowering the CGT rate to overall positive economic effect,” he said pointing to when Finance Minister Charlie McCreevy lowered the rate to 20% in the late 1990’s.
“Whatever way Government goes about compensating for the damage done to the Exchequer by COVID and preparing for the disruption by Brexit, it’s clear that new approaches need to be taken in order to try stabilize job losses and safeguard the economy in any way we can,” he finished.