Mr. Ian Talbot:

I thank the Chairman and members for the invitation. Chambers Ireland is the representative body for chambers of commerce throughout the State. Owing to the geographic spread of our membership, we have unique insights into the issues faced by businesses in all regions. We recognise that signs of a partial economic recovery are evident in certain sectors, but we believe the budget will present an opportunity to focus on more broadly based economic growth. The issues raised in our pre-budget submission can be grouped into two main themes: taxation and job creation; and taxation and local economic development.

On taxation and job creation, our members represent businesses that create and sustain jobs in their local areas and we believe there are a number of adjustments to the tax system that would enable them to create more jobs across the country. Taking on an employee is a big risk for a small business and businesses need to be incentivised to take that risk. It is vital that the employer’s rate of PRSI for class A staff be returned to 4.25% from the rate of 8.25% to which it was increased. Capital gains tax should be reduced to 20% for genuine entrepreneurs to encourage them to invest their capital and create opportunities for growth and job creation. The current level of CGT is a disincentive to potential entrepreneurs setting up a new business. We need to give businesses certainty on the 9% VAT rate for the hospitality sector. That certainty could give rise to additional jobs.

Moves to support SMEs to improve their cash flow should be encouraged. In particular, we would like to see the limit for cash accounting for VAT increased from €2 million to €2.5 million.

Tax credits for research and development can also be of real benefit to business. In our pre-budget submission, we outline a series of potential reforms. We also believe that the employment and investment incentive and seed capital schemes need to be significantly enhanced or the finance put aside for them moved to something more productive. We believe the marginal tax rate should be reduced to below 50% as it is an important part of bringing high value jobs to the country. Another factor we raise is health insurance. A large number of people in the country pay health insurance and those costs have been escalating very significantly through Government policies and general health costs. We believe a focus on that is important. Jobs and job creation will be crucial to achieving a sustainable economic recovery. This budget is an opportunity for the Government to prove its commitment to the businesses that are central to that process.

I will now turn to local economic development. The local authority landscape has fundamentally shifted. We have always worked closely with local authorities and know what local government can to do to help. The process of subsidiarity, which accompanied the recent reform of local government, has made some of our suggestions outside the control of central Government. However, we believe Government must use its influence, particularly in respect of central funding, to ensure an effective local authority network that facilitates economic growth. For example, the local property tax should be retained by local authorities to be spent on local issues. Reductions in the cost of local government must lead to reductions in the cost of doing business. Proposed reductions in the rate of local property tax by up to 15% must not convert into a corresponding increase in commercial rates. We recommend targeted rates reduction in certain areas. The funding model for municipal districts must not affect business through increased parking charges where there is an anomalous calculation that might encourage their increase.

More specifically, there are a number of issues which can be directly addressed in the budget. The 80% windfall tax on rezoned land is proving to be an impediment to building residential properties in certain areas. A VAT anomaly whereby developers pay 13.5% VAT on residential property development costs but not on commercial development should be eliminated. The Government must commit to a number of strategic infrastructure projects that will help drive economic growth in every region of the country.