Business lobby Ibec has called on the Government to ringfence exchequer revenues from the rise in corporate tax payments for capital investment.
In its final quarterly economic survey of the year, the employers’ group said a big increase was needed in public and private investment in housing, roads, transport, education and health.
“Surging corporation tax revenue should be ring-fenced for productive investment projects, not used to inflate current expenditure,” said Ibec director of policy Fergal O’Brien. Making the case that global corporate tax changes will bring significant gains for Ireland, Ibec said the increased revenues should be set aside for investment. While noting that corporate tax payments in the year to date are €3 billion ahead of target, Ibec said such revenues were prone to volatility.
Public investment spending should be increased to 4 per cent of GDP in the next five years from 2 per cent of GDP, Ibec said.
Pressure points
Saying pressure points in the economy could choke positive momentum, the group warned of a failure to fully appreciate and respond to the problems that recovery brings with it.
“A mind-set change is required; we need to look to the future with much more ambition and plan accordingly.”
Mr O’Brien said the business sector has repeatedly stressed the need to plan for a strong recovery, adding that others earnestly claimed Ireland faced years of anaemic growth and unmanageable debts. “This bleak prognosis has not materialised. Instead we have plummeting debt levels and staggering growth. We have yet to face up to the challenge this poses. It is vital we don’t squander the opportunities we are now presented with.”
Consumer spending
The Ibec survey forecasts 7.1 per cent gross domestic product growth for 2015, in line with other private sector forecasts issued after new quarterly national accounts data showed GDP grew at a rate of 7 per cent in the 12 months to September.
“The main reason GDP growth is set to exceed previous forecasts is due to stronger than expected consumer spending, which looks set to grow by over 3.5 per cent in 2015,” the survey said.
“A number of leading indicators for the second half of the year, particularly the strong performance in the Government’s tax take as well as employment figures, have provided further evidence of an economy which grew rapidly in 2015.”
Ibec said Ireland was in a sweet spot right now, making bigger gains than other European economies from the confluence of favourable exchange rates, low interest rates and the falling price of oil.
“In addition, the return of some moderate wage growth and strong increases in employment mean that the domestic economy will account for the majority of total growth both this year and next.
“It is important to remember, however, that many of the drivers of Irish output growth this year are both external and temporary. In this context retaining underlying competitiveness will be key to sustaining prosperity once the effect of these temporary factors recedes.”
