As the Government gears up for a major reshuffle next month, it is facing a growing backlash from businesses.
In recent weeks, it has been revealed that nearly a quarter of the Irish public – including more than half of the business community – believe that it is unfair for businesses to receive higher taxes on their profits in return for paying less in other ways.
A poll by the Independent showed that more than two-thirds of respondents believe that businesses should be able to deduct more tax from their paycheques, while nearly a third believe that the Government should be offering a tax break to all businesses.
The Government has responded by rolling back some of its tax cuts, including the Universal Credit, and introducing a new set of measures to make it harder for companies to deduct tax.
But the changes have had the unintended consequence of making the country’s businesses more dependent on their customers.
In a poll conducted by The Irish Express, 56% of respondents believed that the cuts to Universal Credit were the biggest losers in the reshuffle, with many others believing that the changes would reduce business profitability.
“People don’t want their money taken away from them because of the tax rules,” said Michael McGovern, co-founder of the small business lobby group The Business Institute, which carried out the poll.
“If you take away their incentive to spend money on business, then they won’t be in business.”
They are a lot more likely to buy a home, invest in their company, go to the cinema, go on holiday and buy groceries.
The only thing they’re going to do is buy more.
“The poll found that almost a third of those surveyed believed that they would be less likely to invest if they received a higher amount of tax on their wages and salaries, while about a quarter thought that they could deduct more from their bank accounts.
The Government’s response has been to roll back some the changes it has made to the Universal Benefit, including allowing businesses to deduct up to £3,000 of their tax bill for every £1 they pay in employee rates.
But there are concerns that the rollback is not enough, with more than a third saying that the government should be providing tax breaks to all business, including businesses that are self-employed.
Mr McGovern said that the loss of tax revenue could be catastrophic for the economy and for businesses, while also having a detrimental impact on the economy.
Businesses will also be feeling the pain of higher costs as a result of the change, as they will have to increase their prices.
“A lot of people are struggling to pay their rent, but they have to pay a bit more in order to buy the items they want to buy.””
There’s a real problem of the consumer,” said Patrick O’Sullivan, head of retail research at The Irish Retail Consortium.
“A lot of people are struggling to pay their rent, but they have to pay a bit more in order to buy the items they want to buy.”
If you look at the UK, where the tax rates are the same, people are spending more on clothes, on their house, but also on the food that they are buying.
The consumer’s behaviour is affected by the tax laws, so it will make the consumer more reliant on those who have higher income.
“The Irish Government’s stance on the taxation of business has also been criticised by the European Commission.
It recently announced that it was reviewing its tax system in response to growing public concern over the impact of the changes.
Ahead of next month’s Budget, the Government has been faced with a series of policy changes.
The budget will see a range of tax breaks including changes to the income threshold for Universal Credit and changes to childcare tax concessions.
As part of the Government’s re-shuffle, it will also introduce a package of measures, including scrapping the Irish Universal Credit card system, and replacing it with a new system that will give small businesses the option to charge a higher rate.