Competitiveness key to Budget - Am Cham of Commerce

Speaking at the Chamber’s Annual Thanksgiving Lunch, which was also addressed by Minister for Finance Brian Lenihan TD, Dr Paul Duffy (pictured) President of the American Chamber of Commerce in Ireland said that the upcoming December Budget will probably be “one of the most important to be introduced in living memory”. 

“Budgetary incentives which retain jobs, increase competitiveness, encourage innovation and prepare the foundations for new investment and employment must be the priority,” he added.

Duffy also stressed the importance of the multinational sector to Ireland, observing that it is one of the few industrial sectors to have seen investment and job creation in the past year, albeit at a lower rate than before. 

“Over 2,700 jobs have been announced in 48 new investment projects by IDA Ireland so far this year. A competitive cost base is a necessary pre-condition for this vital and vibrant sector to retain and grow employment in Ireland,” he said.

Don’t increase cost of doing business
He cautioned that any measures introduced in the upcoming Budget need to be carefully assessed to ensure they do not add to the cost burden of doing business in Ireland, and made particular reference to the proposed introduction of a carbon tax, which has been signalled by the Minister for Finance

 “Ireland’s energy costs are above the EU average with electricity costs 35.5pc higher than the EU-27 average in the second half of 2008.  The price of energy has more than doubled during this decade making it the biggest contributor to the cost base after wages,” he said. 

“We cannot impact on Ireland’s capacity to deliver a secure and sustainable energy supply at a competitive cost. I urge the Minister and his department to consult with the National Competitiveness Council ahead of any measure being introduced in the forthcoming budget.”

Handling the R&D tax credit regime
Duffy called on Minister Lenihan to build on the reforms to the R&D tax credit regime introduced in the 2009 Budget saying that government supports to attract higher levels of R&D investment can be developed at no great cost to the Exchequer.

Companies should also be allowed to off-set the R&D tax credit against either corporation or payroll taxes, he said: “By allowing subsidiaries of multinationals to book the tax credit against labour costs on a quarterly basis it would enhance Ireland’s competitive position against other inward investment locations.

 “If the objective is to secure greater levels of R&D investment in order to deliver the smart economy then it must be recognised by Government that R&D activity is one of continuous innovation, not incremental steps and that R&D investment projects are long term in nature.  

“To reflect this, the current incremental system of R&D tax credits should be changed to a volume-based system.  A volume-based system would increase the certainty of the tax credit from a business perspective.  It would allow companies to be forward looking in terms of winning new R&D projects without being penalised for any significant prior investment.”

A competitive personal tax regime
Duffy also addressed the importance of Ireland having a competitive personal tax regime that does not act as a disincentive to attracting and keeping a talented workforce.

“We all recognise that perceived equality in the tax system is an important social goal but we need our most talented people now more than ever and we must recognise that taxation plays an ever more important role in where they chose to live. The wrong tax choices will not only deter talent but will drive what we have away.”