Mr. Fergal O'Brien:

I thank the joint committee for the invitation to attend this meeting. It is very comforting to see so much common ground between the three business organisations represented.

IBEC has five very clear messages for the Government in advance of budget 2014 which I will briefly outline. First, we think now is the opportunity to deviate somewhat from our fiscal plan. This is the first time since the start of the crisis that we are recommending this. We believe that because of the out-performance we have achieved in the last year in particular, in terms of reaching our budget deficit target, and because of the benefit of the promissory note deal, we could do about €500 million less and still comfortably reach our budget deficit target for next year. Again, I echo the comments about confidence in the economy and the need to unleash a sustainable improvement in domestic activity and domestic confidence. We believe getting the scale and size of the fiscal adjustment right is absolutely crucial. We favour a €2.6 billion adjustment instead of a €3.1 billion adjustment. In particular, we strongly believe there is no room for additional further taxation in this budget. We did more in taxation than was promised the last time. There is approximately €500 million in taxes already in the pipeline and we accept that they will come through, but the other €500 million of planned tax increases should be dropped. That would be a big confidence boost for the economy.

Second, we very strongly endorse the messages of continued support for the hospitality sector. Here we have a stimulus measure that is working. It has put people back in employment. In our estimate approximately 25,000 jobs have either been sustained or created not just in hospitality but in other related sectors. The reduced rate of employer's PRSI has been crucial for many cost-sensitive sectors, particularly in parts of manufacturing that operate on very tight margins. That lower rate of employer's PRSI has been absolutely crucial in preserving employment. While the hospitality dimension of that jobs initiative package has probably received more attention in the public debate, the lower rate of employer's PRSI is of equal importance in sustaining, protecting and creating new jobs.

Third, on the issue of employment costs, it remains the key priority to get as many people back to work as possible. We have made some good progress in recent quarters and it is very positive that we are now seeing job creation across a large number of sectors in the economy. We must build on the momentum in the labour market. The best way to get people back to work is not to add to employment costs.

Fourth, the international tax offering remains crucially important, in particular to foreign direct investment and also to indigenous companies in supporting investment in research and development. There is a significant review of the research and development tax credit scheme under way. We believe this scheme is yielding significant benefits to the economy in retaining and attracting research and development activity, creating new research and development jobs and, crucially, putting Irish companies and firms in Ireland in a stronger position to get the manufacturing contracts subsequent to having completed the research and development here. These linkages between the jobs we are creating in manufacturing and what is happening on the research and development front are crucially important.

We do not have as much flexibility as we had previously around the tax offering and how the State can support business in the context of EU state aid rules, but we still have flexibility in the research and development area. We are getting value for money for what we are spending. I am aware that the tax credit scheme is a significant investment by the State, but it is an investment that is yielding benefits. We have carried out extensive studies of the scale of research and development activity, the numbers employed in research and development and the increase in the innovative outputs coming from industry. The scheme has worked and it is crucial that we do not do anything to undermine its attractiveness. Importantly it registers with the multinational investors in terms of the overall suite of measures and package of supports available and must be retained.

Finally, we would argue strongly that this must be a budget for entrepreneurship and investment. We have already heard some comments on the EIIS and how it is not working. We have a lot of practical, tangible ideas that we think would significantly improve that scheme and get some real investment into Irish business. Again, we would very strongly echo the concerns of other business groups around the capital gains tax regime. We have pushed that to the limit. It is now a disincentive for investment and, in particular, we are missing out on the opportunity for reinvestment in cases where companies are being sold and there are proceeds from such sales.