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Ibec calls on government to reduce income tax

The Ibec Consumer Monitor 2014 report paints positive picture for Irish economy

Ibec is urging the government to take steps to secure the economic recovery by reducing income tax and the cost of living, following publication of its Consumer Monitor 2014.

The group that represents Irish businesses has revealed that rising employment, recovering retail sales and strong consumer sentiment are suggestive of a stronger economy.

The ‘fear factor’ that had gripped consumers has eased, with a rise in employment deemed one of the major positive indicators of a consumer recovery.

This is impacting on levels of disposable income, enabling households to look at their savings and consumption, as 65,000 more people are employed compared to two years ago.

“Now is the time to secure the recovery,” said Ibec Head of Policy and Chief Economist Fergal O’Brien.

“The Government must take steps in the budget to ease pressure on households. Positive economic trends mean income tax can now be reduced. This money will go back into the economy and ultimately support growth and job creation.”

He added that reducing tax could lead to a 4% increase in disposable income, with scope for €300m worth of income tax reductions.

“We now need to introduce policies that encourage greater numbers of recent emigrants to come home. This should involve tax cuts, further institutional reform and increased investment in infrastructure and education,” concluded Mr O’Brien.

The report revealed that the household saving rate has fallen from 16.5% to 12.5% since 2009, while private consumption spend should increase by 1.9% in 2014 and 2.9% in 2015.

General level of prices in Ireland increased by 0.2% in the first half of 2014, while the introduction of water charges could impact upon the cost of living.

Household wealth is also expected to recover, while population growth will support the consumer recovery and underpin long-term growth.