EXCESSIVE TAXATION will act as a deterrent to employment, reduce spending and slow economic growth, the representative body for small and medium-sized enterprises has warned.

In its pre-budget submission entitled Securing a Better Future, the Irish Small and Medium Enterprises (Isme) association said it would be very detrimental to depend on increased taxation, particularly income taxes.

Chief executive Mark Fielding said a balance must be struck between raising taxes and cutting costs in the budget. “It is imperative that the Government does not further dampen already reduced domestic demand by excessive increases in income tax.”

The business group said reform of the public sector by reducing its size and cost and by implementing and monitoring an immediate efficiency drive would be preferable.

It also called for initiatives on employment retention to address the deteriorating jobs market and the creation of a level playing field for small and medium enterprises (SMEs) by reducing State influenced business costs, including local charges, energy and transport.

Separately, the Institute of Directors in Ireland (IoD) has called on the Government to retain the 12.5 per cent corporate tax in the budget.

Securing direct foreign investment should be central to our recovery and growth strategy, and Ireland’s low corporation tax was a key factor to attracting and retaining multinationals, the group said.

It called for steps to be taken to alleviate the difficulties faced by businesses when accessing credit.

“Lack of working capital is crippling SMEs and start-ups, and this must by urgently addressed by Government,” said Ann Riordan, IoD president. The Government must ensure that the budget not only protected the viability of Irish business but also focused on creating a framework for sustainability, retention and growth.