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'Time to ease off on austerity and abandon planned tax hikes' - IBEC

IBEC says Ireland could drop the ‘new taxes’ planned for Budget 2014 and still meet the EU’s targets.

IBEC chief economist Fergal O'Brien says Budget 2014 could drop all of its new taxes and still bring Ireland within its deficit targets.
IBEC chief economist Fergal O'Brien says Budget 2014 could drop all of its new taxes and still bring Ireland within its deficit targets.
Image: Mark Stedman/Photocall Ireland

THE BODY REPRESENTING Ireland’s employers has called on the Government to abandon plans for €1.8 billion in new taxes over the next two Budgets – saying extra taxes would kill off Ireland’s delicate economic rebound.

The Irish Business and Employers’ Confederation (IBEC) says economic data for the first quarter of 2013 shows that consumer confidence remains fragile, with economic growth weaker than expected.

Its latest quarterly economic outlook (PDF), released this morning, says this weak growth could be killed off by levying further taxes and charges on consumers who still remain fearful about their finances in the medium term.

The group says the Irish economy will grow by 1.8 per cent this year – a significantly higher rate than projected by either the European Commission or the Irish Government – but that economies of other European countries could falter and drag us down.

“We need to press ahead with reducing public sector expenditure, but taking more money out of the economy through tax hikes is the wrong way to go,” said IBEC chief economist Fergal O’Brien.

“Fixing the public finances can only bring us so far – consumers need to see that the end is in sight before they will start spending again.”

O’Brien said the public had welcomed deals on the promissory notes, but that the public now needed to reap some of the benefits by having the burden of austerity lifted somewhat.

“The budgetary adjustment should be less than the €3.1 billion currently targeted,” he said.

“We now have the potential to abandon the planned tax increases and still hit a budget deficit of about 4.5 per cent, well below the target of 5.1 per cent.”

O’Brien said an adjustment of that scale would underline that Ireland remained committed to restoring order to its public finances, while limiting the damage that cuts could achieve.

A further €2 billion of adjustments is scheduled for Budget 2015, in order to conclusively bring Ireland within the 3 per cent debt limit set down by the EU’s excessive deficit programme and the EU-IMF bailout agreement.

Budget 2014 is to include €2 billion in spending cuts and €1.1 billion in new tax, while Budget 2015 is to have a further €700 million in tax increases.

Read: Brussels report says Irish economy will grow slightly less than govt forecast

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Gavan Reilly

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