Small business lobby group ISME is calling on the government to rein in state spending in the Budget 2023, citing concerns about “continuous deficit spending” and “too many macro indicators of international recession”.

“ISME is not saying we expect an imminent recession. We are saying that there are sufficient indicators of a possible recession that government must act prudently, and plan and budget on the basis that one could occur in the next six to 12 months,” says the organisation's pre-budget submission.

Referring to growing inflationary pressures, ISME wants the state to ensure that “excessive” wage increases are kept in check, and says that instead “any spending to mitigate inflationary effects should be prioritised on the most in need, via the social protection system”.

On specifics, the organisation sets out six main measures it would like to see implemented in the Budget:

• A comprehensive package of tax reform, including a solidarity USC levy of 3% on all PAYE workers earning more than €100,000 per annum.
• Raise an additional €500m in CGT by lowering the rate to 25%.
• Eliminate the punitive ‘PRSI Transition Zone’ for lower paid workers, by charging a new 2% rate of PRSI on weekly earnings up to €440 and a new 6% rate on marginal earnings above €440, which would increase take-home pay for all full-time workers earning less than €880 per week.

Chief executive Neil McDonnell said: “We believe our proposals on USC and CGT would raise an additional €800m per annum for the Exchequer.

In Association with

“However, with economic data showing a continuing divergence between the GDP economy, including the multinationals, and the domestic economy, which is mostly SMEs, we need a comprehensive stakeholder review of indigenous industrial policy to improve the performance of our SME sector.”

"We want to see measures to encourage an increase the number of firms listing on the Stock Exchange, and we want to make it easier for employees to invest in them.

"The cost of rent and housing is now so high that employers are buying accommodation for their employees. This creates a BIK problem for both employers and employees, and is unacceptable. Private landlords must be attracted back to the rental market via the taxation system to increase the stock of available housing," said McDonnell.

On income tax, ISME wants to see measures to bring marginal tax rates into line with international standards by raising the marginal rate entry point and ensuring that it rises in line with the average industrial wage.

ISME points out that French workers, for example, start paying a higher rate (41%) on earnings above €73,000, as against an entry point of €36,800 for Irish workers.