CUTS in corporation tax rates are thought probable in next month's Budget, under the new national agreement to be announced on Friday. The programme also promises tax relief for the business sector and for personal taxpayers. It says this can be afforded while keeping the general government deficit - the exchequer borrowing measure used by the EU - at no more than 1.5 per cent a year.
The programme says £100 million will be spent on the business tax package, "which will provide for progressive reductions in the standard rate of corporation tax and improvement in the position of small firms over the three years". This indicates that the standard 38 per cent corporation tax rate will be cut in the Budget, and a reduction in the 30 per cent rate which applies to the first £50,000 on profit is on the cards. The latter measure would be of particular benefit to small firms.
The agreement says that the Government recognises the importance of an early decision on the future of the 10 per cent corporation tax rate, which extends to 2010 and 2005 for IFSC firms.
As already reported, the plan commits to £900 million in income tax reductions over its three years. For those receiving the agreed pay increases of 9.25 per cent, it calculates that this will lead to a 13 per cent rise in their after-tax income. A reduction of at least one percentage point in the standard 27 per cent income tax rate and the 5.5 per cent rate of employees' PRSI in the Budget is expected.
The programme - entitled "Partnership 2000" - sets down financial targets. It says that the general Government deficit will be held to at most 1.5 per cent of national output in each of the three years. This year's Budget target is 2.6 per cent, although the outturn will be considerably lower, while the 1.5 per cent figure is well below the 3 per cent limit set in the Maastricht Treaty.
These forecasts are underpinned by growth forecasts from the Department of Finance. They are for a 5.5 per cent growth in Gross National Product next year and 4.5 per cent in 1998 and 1999. Inflation is expected to remain moderate at around 2 per cent.
The programme has a lengthy section on enterprise and small business. Among its more significant commitments are the introduction of a mechanism to review competitiveness - along the lines of the Competitiveness Council proposed by IBEC, the employers' group. This would include representatives of all the social partners and they would regularly review Ireland's competitive position and address issues such as the administrative burden on business.
The document reiterates the Government's commitment to join monetary union. It refers to the competitive threat which a depreciation of sterling could mean, if Ireland joined and Britain stayed out. It refers to the conclusion of the recent National Economic and Social Council report, which said that there must be "sufficient trust between the social partners to ensure an adequate information flow and burden of sharing".
The NESC called for continuous efforts to improve competitiveness, the use of hedging instruments by business and the potential of profit-sharing arrangements to combat this problem.
The document promises new approaches to education and training, including measures to promote "lifelong learning" and an increased emphasis on enterprise in schools.
For small business, the Government promises to investigate new loan and finance schemes. A national strategy of administration simplification is promised. This would include new codes of practice by Government departments; streamlining the planning process and removal of the statutory audit requirement on private limited companies and co-operatives with an annual turnover of less than £100,000.
