Ireland's economic recovery threatened by tax hikes, says watchdog

Tax hikes heaped on Irish employees during the recession, coupled with rising business costs, are hampering Ireland’s business competitiveness and could hinder the country’s economic recovery, according to an independent watchdog.
 
The independent National Competitiveness Council (NCC) has warned that Ireland’s cost competitiveness was deteriorating in comparison with other countries, with rising wages and employee contributions, coupled with rising energy bills for firms having an impact on jobs and growth.
 
Richard Bruton, Enterprise Minister, believes the fresh report from the NCC is a “major wake-up call”.
 
“Now is not the time for businesses to hike their prices, now is not the time for unions to make wage demands, and now is not the time for Government to take its foot off the pedal in making the structural reforms we need,” he added.
 
Don Thornhill, chairman of the NCC, has called for cuts to income tax within its Budget, as the country seeks to hold its own in terms of cost competitiveness.
 
“If there is margin for offering tax relief in the Budget, it would be best in doing something to make the tax bands more favourable,” said Thornhill.
 
“This is an extremely contingent and constrained situation. The government’s coffers are by no means full and overflowing and there is important budgetary work still to be done.”
 
The NCC’s report on the cost of doing business in Ireland finds that costs have in fact improved in recent years, making Irish firms more competitive internationally.
 
However, gross earnings in Ireland were the eighth highest in the Eurozone while net wages were sixth highest.
 
“The cumulative impact of increases in income taxes, changes to bands, the introduction of the Universal Social Charge etc have weakened competitiveness since the onset of the recession,” the report says.

Date published 2 Apr 2014 | Last updated 2 Apr 2014