The Small Firms Association, which represents over 8,500 small businesses in Ireland, has launched its pre-Budget submission to government with a call for a suite of measures aimed at improving competitiveness and removing anomalies in the tax system that penalise or obstruct entrepreneurship.

Introducing the SFA’s 3,500-word submission, chairman AJ Noonan (pictured) stated: “Competitiveness must be at the heart of Budget 2017. In an environment where many factors are outside of our domestic control, the government must relentlessly pursue improvements in the competitiveness of those areas it can influence. This is especially critical in light of aggressive competition from the UK in the aftermath of the Brexit vote.”

The SFA is calling on the government to place the same importance on competitiveness over the coming years as it placed on macro-economic stability during the recession. “Tax reform is key to unlocking job creation, investment and growth and it forms an important dimension of making the Irish business environment attractive relative to the UK,” said Noonan.

Noonan added: “The tax system has a vital role to play in supporting development at each stage of the life cycle of a small business. The capital gains tax regime is in need of an overhaul to boost investment. A 10% entrepreneurial rate would encourage business owners who sell their business to invest in another company. It is vital that this applies to all businesses so that the impact can be felt immediately. Practice over the last 20 years has shown that when the CGT rate drops, the Exchequer benefits due to a surge in activity, so this is a clear win-win.”

The full submission, available from the SFA website, appears to suggest that the national minimum wage should be abolished. “It is imperative for the competitive position of Ireland that wage levels are decided in a competitive labour market. Wages should not be determined by an artificial legal instrument such as the minimum wage. Any wage increases must be linked to improved productivity and the profitability of the business.”

In Association with

Priority Tax Reforms

The SFA’s priority recommendations for tax reforms to benefit business and the self-employed are:

• End discrimination against the self employed in the tax system to encourage entrepreneurship by:
  • Abolishing the 3% USC surcharge that applies only to the self-employed
  • Increasing the Earned Income Tax Credit (EITC) to the same level as the PAYE tax credit
  • Introducing a voluntary PRSI system for the self-employed
• Reward work by increasing the entry point to the marginal rate of tax and decreasing the rate by 1%
• Review employer PRSI to fulfil the commitment that the National Minimum Wage increase on 1 January 2016 would not penalise employers
• Reduce the CGT rate to 20%, with a 10% entrepreneurial relief up to a lifetime limit of €15 million, to stimulate investment
• Introduce a scheme similar to the UK’s Enterprise Management Initiative for employee share options in small firms
• Enhance the Employment and Investment Incentive Scheme (EIIS) to encourage friends, families and experienced local investors to invest in small firms.

Beyond tax reform, the SFA wants investment prioritised and encouraged.

Noonan said: “The Irish economy is starved of investment. Years of under-investment, coupled with Ireland’s growing population, is leading to serious bottlenecks in transport, education, broadband, housing and other public infrastructure. Capital expenditure must reach 4% of GDP as soon as possible and investment must be targeted strategically.”

He went on to list the organisation’s investment priorities:

• Improving broadband infrastructure, particularly in rural areas
• Developing public transport links
• Building a real motorway network linking regional cities
• Addressing housing shortages
• Enhancing education and in-work training.

The submission concludes: “Small business can lead the way in helping Ireland to continue to broaden and deepen its recovery. But in order to do this, the government must create the right conditions by putting in place an enabling tax environment, curbing the cost of doing business (in particular labour costs) and delivering world class physical and digital infrastructure. More than anything, Budget 2017 must deliver competitiveness improvements to allow small business to put its best foot forward, domestically and internationally.”