The Government should consider cutting the 12.5% corporation tax rate, and prepare an “aggressive” strategy in the budget to prepare for any fallout from the decision of the UK to quit the EU, business group Ibec has said.
In a new policy document, the business group also advises the Government to temporarily secure a break on the EU spending rules and splash €1bn in building social housing next year.
It says a massive programme to build new social homes - the largest in the history of the State - is the only way to start to address the housing crisis.
Ibec said its new document, called ‘Ibec priorities for budget 2017’, represents a call to arms for the Government to respond in a new way to the threat of the Brexit on Irish businesses.
“The most important thing about this budget is it is seen as a Brexit response. A real aggressive drive is required.
"The Government has sat on its hands – but we have already seen [UK chancellor] George Osborne setting the terms for the UK government what they want to do with corporation tax cuts to 15%, possibly lower,” said Ibec policy chief Fergal O’Brien.
“The UK has laid down the gauntlet on its business tax ambitions, Ireland must now respond,” he said. “We are looking for a more aggressive approach”.
Ibec said a corporate tax rate cut should be part of the Government’s armoury, the budget should address the immediate challenges of the Brexit vote.
It said it was most concerned about the Irish indigenous companies which now face financial pain because of the slump in the value of sterling against the euro since the Brexit vote on June 23.
Ibec urges more favourable tax terms for the self-employed to match and compete with the incentives the UK offers its entrepreneurs, in capital gains and in the taxing of share awards.
“Sterling is a massive issue. This budget has to be about reacting to Brexit and addressing those competitive concerns which will help Irish business to be more competitive,” Mr O’Brien said.
“We think it would be completely illogical for example to increase our minimum wage to impact on those sectors such as food processing, tourism, retail and indigenous exporters, who are trying to cope with an exchange rate,” he said.
Mr O’Brien said Irish companies were already suffering after the plunge in sterling and it was up to Government to control business costs.
“Not that many companies are hedging. The majority of the smaller companies are going to be exposed really quickly,” he said, adding that proposals to introduce a sugar tax and raise excise duties on tobacco would hurt retailers.
“The UK is going to take out the bazooka. If they are outside the EU, they are going to act on state-aid issues.
"We are going to have to react. The budget is the first opportunity for the Government to show what they can do for indigenous companies,” Mr O’Brien said.
Ibec said that cutting the USC rate would not help businesses. It said its tax measures would cost €469m and its recommendations for spending on infrastructure and research and development would cost an extra €250m.
Spending on social housing would be covered by the Government securing a derogation from EU spending rules, Ibec said.
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