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Irish business 'nervous about unpleasant budget surprises'

But they are brightened by further increases in activity levels over the past three months.

Image: Business Sentiment via Shutterstock

DESPITE AN IMPROVEMENT in Irish business conditions over the past three months, companies will still watch the Budget 2014 announcement with considerable trepidation.

The unveiling of the government’s fiscal plan for next year is seen an important event for more than 70 per cent of respondents in the quarterly KBC Bank/Chartered Accountants Ireland Business Sentiment Survey, published today.

“This reflects the fact that the Budget affects both the demand for the goods and services produced by many companies as well as Ireland’s cost base vis-a-vis external competitors,” explains economist Austin Hughes.

But, he says, firms are more concerned with individual measures which could affect them, rather than the overall adjustment figure.

“This may reflect a measure of concern that some spending and tax changes could threaten a still tentative recovery,” added Hughes. “So, Irish business seems a little nervous about the risk of unpleasant Budget surprises.”

Business leaders are focusing on the costs of providing employment and the costs of investment, two facts also borne out in the latest survey from IBEC today.

The three hot topics for respondents were Pensions Tax Relief, PRSI and capital gains tax on business investments.

“Not surprisingly, the consumer goods and services sector are expressing strong concern as well over the proposed termination of the special 9 per cent rate of VAT, which particularly helps the hospitality industry,” added chief executive of Chartered Accountants Ireland, Pat Costello.

If we are to summarise the tax messages coming from this quarter’s survey, it would be to ask the Minister not to fix anything that isn’t broken.  As far as possible, if he can’t introduce any improvements, the Minister should leave a fragile business tax environment alone.

According to the latest report, Irish business conditions brightened through the third quarter of 2013 with the improvement driven by a significant rise in the number of firms reporting increased activity levels between July and end-September.

The strongest improvements were seen in construction and other property-related activities that are coming from a weak base.

“The turn in this sector remains tentative but it is hinting at healthier domestic economic conditions in the coming year,” said Costello.

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