It’s time for a break
If consumers suddenly found themselves with a few extra euro in their pockets as a result of less severe taxes, they would surely be tempted to spend more, writes Fionnuala Carolan
28 July 2014
You can’t tax your way out of a recession. I think it is fair to say that we have established that fact. Can you spend your way out of a recession? Well we could try to find out if we had some disposable income left at the end of the month. The high level of tax in this country is preventing any sort of meaningful recovery and it is about time that the government gave some reprieve to the Irish people.
Up to now any increase in spending has been as a result of heavy promotional activity. In essence it is an increase in volume but not in value. Retailers have had to engage in competitive promotions to tempt consumers to spend outside of their budgets but sales on discounted goods do not reap huge profits. This just keeps the wolf from the door in most small businesses.
The CSO figures for retail sales in May showed the value of sales excluding motor and bar sales rose by 1.1% compared with May 2013. However there was an increase of 3.4% in the volume of those sales, highlighting the fact that retailers continue to discount prices to drive sales. Consumers have been ultra-cautious in their spending over the past number of years and it would seem that many have resisted buying non-essential items. If consumers suddenly found themselves with a few extra euro in their pockets, they would surely be tempted to spend on items that they might have considered outside of their budget before. The recession has left a lot of scars and it won’t be forgotten easily but the Irish people have had their fill of austerity and it’s time that the government gave people a break. Up to now, they seem to have been doing everything in their power to deter spending. From property taxes to water charges to cuts in benefits, it has been nothing but bad news and has created reason after reason for people to save rather than spend.
Anne Brady’s feature on page 16 of this issue investigates the results of our high tax burden on the retail trade. She explains how a report from think tank TASC proves that those on a lower income are more likely to spend in their locality, while high earners tend to spend disposable income on foreign travel and imports. Cutting the lower level of tax should be the first move by government in the next budget.
Ibec has made a pre-budget submission this week calling for a reduction in income taxes in order to boost spending. The employers group is seeking €300 million worth of income tax reductions, a €100 million reduction in consumer taxes and the abolition of the pensions levy. It says that less austerity is needed now. Ireland is required to reach a 2.9% budget deficit target in 2015, but Ibec believes that a prudent approach would be to target a 2.7% deficit. It says that this will support Ireland’s reputation and credibility in the international financial markets. Aside from protecting our international reputation, a tax cut will have wide-ranging effects in the domestic economy and we could finally take up the challenge of spending our way out of a downturn. We deserve the chance to try at least.
In this issue we have 12 pages dedicated to documenting the winners of ShelfLife’s Grocery Retail Awards in Management, which took place at the end of May in Dublin. According to the judges, the quality of the candidates was extremely high this year. You can read Gillian Hamill’s in-depth interview with the overall winner, Paul Dunne of SuperValu Swords, on page 24. It was wonderful to meet the top retail talent in the country and we are already looking forward to doing it all again next year!