Galway Chamber CEO Michael Coyle’s mind on Wednesday when the full details of Budget 2013 were made known. Mr Coyle says the budget contains some “token measures” that will benefit businesses.
These include the fact that pre-budget speculation that employers could be made responsible for the first four weeks of sick pay for their employees ultimately proved unfounded, and the confirmation that the nine per cent tourism VAT rate will continue into 2013, which Mr Coyle says “gives a little bit of certainty to the sector”.
It is a “relief” that the corporation tax rate will remain at 12.5 per cent and he also welcomes the fact there are no changes in employer’s PRSI rates set to be introduced in 2013, which he says is always a concern.
“That is a direct cost and we had called for the cost of employment not to be hit. It’s expensive enough to employ people, let’s not make it more expensive by adding to the cost of employer PRSI,” he says.
Other measures welcomed by the business community include a 25 per cent increase in the threshold for VAT cash receipts basis accounting to improve cashflow for SMEs, the doubling of the amount of expenditure that qualifies for the R&D tax credit for SMEs, and a new seed and venture capital scheme.
However, such “token” measures do not go far enough to support business, according to Mr Coyle.
“The negative, of course, for business is that the target and the focus for this particular budget has been individuals and, when you hit individual income, you hit by definition family and household income, and you take spending power out of the household,” he says.
Suggesting that individual households have been hit, on average, by between €500 and €800 per annum through measures such as reductions in the children’s allowance, Mr Coyle says that, unfortunately, the budget is very bad news for the domestic economy and, in particular, the retail sector.
“This budget will be particularly damaging to the retail sector where thousands of jobs are already in difficult situations,” he says, as retail businesses rely “very heavily” on customer spend at Christmas. Budget 2013 won’t relieve any fears that consumers may have.
He adds that the sector is suffering the effects of five consecutive years of difficult economic conditions, and that there is “absolutely no doubt” that the much-publicised increases in taxes on alcohol introduced in the budget will result in job losses.
“It’s an easy target to put a euro on a bottle and that will generate significant revenues and so on, but when you aggregate up all those additional euros that will now be spent on bottles of wine etc, they won’t be spent in other areas of the retail sector so it’s not a positive,” he says.
Acknowledging assurances from the Government that this budget will be the most difficult of its tenure as it attempts to regain control of national finances, Mr Coyle says such assurances “ring pretty hollow” when you see the impact austerity measures are having on household incomes and spending power.
“The Government has opted for direct taxation rather than stimulating economic activity, which itself would generate taxation, revenue,” he says.
Mr Coyle adds that, while some progress has been made on public sector reform, the Government’s bids to reduce spending and act on efficiency reports identifying potential savings in the sector are “simply too slow”.
“The PAYE worker, all sectors of society through the property tax, are paying for the slow pace of reform of government spending in the public sector,” he warns.
He adds that if a report card was being issued on Budget 2013, it would receive an A+ from the Troika, a C- from business, and a fail grade from the general public.