ISME, the Irish SME Association today (October 10th) responds to Budget 2018. The Association has compiled a score card on the main issues impacting the SME sector and compared our pre-budget submission with the actualities of Budget 2018. The Association welcomes the establishment of a Brexit specific loan scheme for SMEs, the steps taken to bridge tax parity. We also welcome the introduction of the new employee engagement programme.
Corporation Tax: The Association welcomed the retention of the 12.5% corporation tax rate. Now more than ever Ireland needs to remain competitive, attractive and open to Foreign Direct Investment. The Association scores the Government 10/10.
Entrepreneurship: The Association welcomes some of the measures introduced such as the increase in the Earned Income Tax Credit to €1,150. Whilst this is welcome, it is not in keeping with the original commitment to eliminate the disparity with the PAYE tax credit of €1,650 over three budgets. The mid-rate of USC has been reduced by .25% to 4.75%. An opportunity was missed to address the disparity between the UK and Ireland in CGT Entrepreneur’s relief. The UK enjoys a ceiling of £15m, compared to our €1m. The CGT rate remains unaltered at 33%. The Minister announced a new initiative called ‘KEEP,’ the Key Employment Engagement Programme, to help SMEs attract and retain key employees. The Association marks the Government 5/10.
Remuneration: One of the declared aims of this Administration is to ‘make work pay’. It is generally accepted that the threshold at which the marginal rate of tax kicks in is too low and is acting as a disincentive to work. A marginal improvement of 0.25% in the USC charge for self-employed workers earning up to €70,044. The Association marks the Government 6/10.
Access to Credit: ISME requested that a set of regulations for Irish Peer to Peer lending (P2P) be created and implemented as soon as possible. Its success is already established in the UK. ISME welcomes the introduction of SME loan and Agrifood loan to support the export industry to expand beyond the UK market, providing some support to the potential impact of BREXIT. The Association gave the Government 5/10.
VAT: The Association called on the Government to reduce the highest rate of VAT from 23% to 21% to boost the domestic economy. Retention of the 9% VAT rate on Tourism is welcomed, as it has acted as an important catalyst in driving and boosting tourism numbers. The association had called on the Government to increase threshold on the cash receipts basis for accounting for VAT on sales, which would have greatly supported working capital within the SME sector. The Association scores the Government 6/10.
Rebooting the Domestic Economy: The Association welcomes some of the measures to support the economy. Investment of €1.83 billion in housing in 2018 and the targeted construction of 3,800 new social houses by the Local Authorities and Approved Housing Bodies in conjunction with an increase of €149 million in the Housing Assistance Payment Scheme in 2018 should contribute to supporting the housing sector. The minister announced the introduction of a €750 million housing finance support via the Ireland Strategic Investment Fund called Home Building Finance Ireland (HBF). Investment in the Healthcare Sector is to reach €15.3 billion in 2018, reflecting a 5% increase on 2017. Additional staffing of 1,800 is expected in front line services. Investment in Education is expected to reach €10 billion with an additional 1,300 teaching posts in schools and 1,000 additional Special Needs Assistants in 2018. Investment in childcare through direct subsidies to providers and an extension of the free pre-school programme ensuring entitlement to a full two-year service will have a positive impact on female participation in the work place. The Association scores the Government 7/10.
Jamie O’Hanlon, ISME National Council Member and partner in Avid Partners Accountants and Business Advisers said: ‘Budget 2018 is more geared toward the development of the economy and the social fabric, as opposed to individual or commercial wealth.’
Commenting on todays’ budget ISME CEO, Neil McDonnell said “While more could have been done to improve our competitiveness and innovation, we welcome some of the measures today. The increase of €200 in the Earned Income Tax Credit to €1,150, it is step towards equity for the self-employed, but we will continue to fight for full parity betweenEITC and the PAYE Tax Credit.”
“The new Key Employee Engagement Programme (KEEP) to support small and medium sized businesses will hopefully allow SMEs to retain key staff”
“The introduction of €300m Brexit Loan Scheme, is a recognition by government of the Brexit challenges faced by SMEs. We have lobbied consistently for mechanisms that would assist SMEs who have direct exposure to Brexit.”