Dublin Chamber has described Budget 2020 as a modest step in the right direction, but warned that more robust action will be needed to prepare Irish enterprises ahead of a possible no-deal Brexit.
Dublin Chamber, which has campaigned actively on entrepreneurship and indigenous enterprise in the run-up to Budget Day, was reacting to Minister Donohoe’s Budget statement this afternoon, in which he outlined a number of limited changes to the tax environment for SMEs.
The Chamber welcomed improvements to the Employment & Investment Incentive Scheme (EIIS), which it said would encourage greater investment in SMEs. However, the Chamber has cautioned that, without changes to the Capital Gains Tax regime, investment levels will remain lower than they should be.
Dublin Chamber CEO Mary Rose Burke said: “The ESRI has identified a yearly investment gap of €1 billion in the Irish SME sector. This urgently needs to be addressed as the business community faces one of the biggest challenges in living memory. The changes outlined today are welcome, but Budget 2020 needed to go much further to help companies navigate the current uncertain trading environment. The Government will need to keep a close eye on SME performance over the coming months as Brexit unfolds to ensure that firms have the support they require.”
Ms Burke said: “Improvements to the R&D Tax Credit for micro and small enterprises are more modest than we had lobbied for, but represent a welcome development and will help fund innovation. We would hope to see these improvements extended to medium-sized enterprises soon. This is the first budget in several years that offers tangible improvements to the business tax environment for entrepreneurs and scaling Irish firms. This could not come at a more important time. However, there is some disappointment at the lack of support for entrepreneurship. Many firms were hoping for positive changes to CGT Entrepreneur Relief this year. Action on CGT represents an obvious next step for the Government.”
Dublin Chamber said it is disappointed by limited changes to the Key Employee Engagement Programme (KEEP), which aims to help SMEs compete with multinationals by allowing them to pay their staff with shares in the company. This tactic has been cited by SMEs as a key method of retaining talent.
Dublin Chamber CEO Mary Rose Burke said: “The changes to KEEP, while an improvement, clearly to not go far enough and many startups who hoped to avail of the scheme will view them as mere tinkering.”
Dublin Chamber, which represents 1,300 businesses throughout the Greater Dublin Area, had warned in its pre-budget submission that Ireland needs to sharpen its competitive edge ahead of Brexit, releasing a study showing that Ireland lags behind the UK in 12 out of 16 tax competitiveness metrics.
Mary Rose Burke said: “The relative weakness of the indigenous sector leaves Ireland acutely vulnerable in a volatile world. With Brexit approaching, we must ensure that Dublin maintains its business tax competitiveness versus the UK. That’s why the Chamber has been campaigning for stronger measures to encourage entrepreneurship and support scaling Irish businesses. In the medium term, Government should work towards a 20% Capital Gains Tax rate for all unlisted firms. We are conscious this could have significant exchequer implications in the short term, so we called for a range of more targeted measures this year. We have seen some of these recommendations adopted in Budget 2020.”
“Ireland needs a step change in our approach to entrepreneurship and SME growth to complement our ongoing success in FDI. We need to make entrepreneurship pay, boost investment in the SME sector, encourage more innovation, and help Irish start-ups to compete for talent. After several years of frustration, we are now seeing movement in the right direction. But there is still a long way to go,” said Ms Burke.