IBEC, the group that represents Irish business, has stated that the Government has relied too heavily on increasing tax in Budget 2012, rather than reducing current expenditure. The group welcomed specific measures aimed at supporting R&D and financial services, attracting mobile talent and restoring normal activity to the property market, but said the scale of these positive measures was small when compared to the very negative effect of the €90 million increase in employer PRSI charges and the major reduction in the redundancy rebate, announced yesterday. The total cost of Budget 2012 to business will be in the region of €400 million.
IBEC Director General Danny McCoy said: "€1.6 billion will be raised in tax, with only €1.45 billion saved in current expenditure reductions, and this will undermine future economic growth. Budget 2012 will be one of the most inflationary budget in decades, adding approximately 1.5 per cent to the inflation rate next year, and will undermine Ireland's efforts to regain competitiveness lost during the boom years. Abolishing employer PRSI relief on employee pensions will increase labour costs and is a further significant cost on employment, following the move to reduce the redundancy rebate yesterday.
"The budget will introduce very significant increases in indirect taxes, such as VAT and carbon tax. While this is preferable to income tax hikes, it will nevertheless hit consumer spending and result in a more difficult trading environment for domestic businesses. As suggested by IBEC, the Government did however take positive steps to support R&D and the financial services industry, attract mobile talent and restore normal activity to the property market. The Government has shown a lack of new thinking in its efforts to close the Budget deficits and has instead relied on reducing service provision and increasing taxes that will harm the economy."