Jobs initiative needs monitoring

Off the fence
Jobs initiative needs monitoring

Off the fence
Mairead O'Grady

The Jobs Initiative announced by the The Minister for Finance, Michael Noonan, TD, last week includes a number of proposals aimed at incentivising entrepreneurship and job creation. The most welcome was the reiteration of the Government’s commitment to the 12.5 per cent rate of corporation tax as an integral part of Ireland’s strategy to encourage growth, attract foreign investment and increase employment.
The Jobs Initiative announced focuses on measures that offer the greatest potential for expansion and employment creation in the domestic economy and targeted labour intensive areas that will generate jobs quickly. 
A new temporary rate of VAT at 9 per cent has been introduced for a range of goods and services in order to stimulate employment, focused mainly on the tourism sector. This new reduced rate of VAT will be introduced with effect from 1 July 2011 and will apply until the end of December 2013. An example of goods and services which can avail of the new rate will include restaurant and catering services; hotel and holiday accommodation; admissions to cinemas, theatres, certain musical performances, museums and art gallery exhibitions; services in fairgrounds or amusement parks; the use of sporting facilities; hairdressing services, along with printed matter such as brochures, maps, programmes, leaflets, catalogues and newspapers.
This is a very welcome measure and is a drive towards assisting tourist related activities by getting people to spend more of their discretionary income.
The lower rate of employer PRSI (8.5 per cent) is to be halved on jobs paying up to €356 per week.  This change is to take effect from 1 July next and applies to all employees earning up to this income level (and not just new employees). The level of the minimum wage is to be reinstated on this date also. Again, this is a very encouraging for job retention and creation as it will reduce the cost of labour of labour for all businesses.
In a further attempt to reduce the cost of employment in business, the charge to employer PRSI on share based remuneration, announced in the last Budget, is to be abolished with effect from 1 January 2011. 
Obviously, the favourable measures announced above have to be funded, and this is to be sourced by way of a temporary levy on funded and personal pension schemes. A levy of 0.6 per cent is to apply to the capital value of assets under management in pension funds established in the State. This levy is to apply for 4 years, commencing in 2011. 
The initiatives are very welcome, particularly in labour intensive businesses and the tourism sector in general, but the results will be closely monitored and it remains to be seen if the measures are sufficient to kick start our economy.

Mairead O’Grady is an accountant with Russell Brennan Keane, one of Ireland’s largest business advisory and accountancy firms.