The decision to reduce the size of fiscal adjustment from €3.1 billion to €2.5 billion was the correct one and will soften the negative impact of the budget on economic growth. The budget also included a number of welcome initiatives to support business and entrepreneurs and the stimulus measures are largely sensible. The main disappointment is that Government has put too much extra tax on an already over-taxed economy.
Ibec had sought a number of pro-business and pro-growth measures which were delivered in Budget 2014:
The adjustment of 2.5 billion was less than planned and in line with our recommendations
Employment costs have not been significantly increased and there were no income tax hikes
The successful reduced rate of VAT for the hospitality sector has been retained
Government published a positive review of the R&D Tax Credit Scheme and made some welcome enhancements to it
The capital gains tax regime has been reformed to incentivise reinvestment
The home improvement tax credit will support domestic demand and construction sector employment
The removal of the Employment Investment and Incentive Scheme (EIIS) from the high earners restriction will support investment in the SME sector
Commitment to a trade finance initiative will help those exporters currently struggling to finance their export growth activity
The main negatives from a business perspective were the substantial increase in alcohol excise which is likely to be counterproductive from an Exchequer perspective; the retention of the pension levy; the reversal of the lower employer PRSI charge; and changes to illness benefit.