Ibec chief economist Gerard Brady has mooted a series of budget measures to encourage recovery and investment in SMEs, as well as coping with the particular impact of Covid-19 on businesses’ balance sheets.

Brady said that Ibec would like to see the following in Budget 2021: 

• Radically improve the CGT entrepreneurs’ relief. This can be achieved in a balanced way by increasing the lifetime limit on capital gains to €15m and expanding the relief to passive investors in areas with high growth potential.

• Introduce tax measures to support business investment. For investments in the years between 2020 and 2022 introduce full expensing for fixed investment for sectors worst affected by Covid-19, allow any investment losses under EIIS against CGT and increase the annual limit on investment to €2m.

• Unlock non-Exchequer investment in infrastructure provision. Introduce government-backed exemptions to local authority charges to unlock non-Exchequer investment in infrastructure such as renewable energy and 5G.

In Association with

• Graduate the 70% turnover threshold in the EWSS. The ‘cliff edge’ turnover threshold in the EWSS stands to introduce significant adverse incentives to company operations. The subsidy should be graduated between 70% and 90% with firms losing part of the subsidy as they hit turnover or order milestones.

• Re-introduce the 9% VAT rate for tourism and extend the rate to the on-trade for companies in the hospitality and personal services industries until the end of 2022.

• Explore an incentive-driven arbitration model for disputes over commercial leases. This should include a facility for some state burden-sharing and provide short-term protection from eviction, based on the recent Swedish state-aid approved model which covers up to 50% of rent reductions negotiated between tenants and landlords for the period of the crisis at a cost of €400m.

• Ensure potential tax liabilities related to Covid-19 income supports do not become an undue burden. Potential tax liabilities arising from the WSS and other income supports must not act as a disincentive to engage with future use of short-time work or income continuance schemes. 

• Any adjustment to tax credits should happen over as long a period as possible and five years at a minimum.

• Work on a European level to extend the concessional treatment of VAT on PPE used in healthcare settings to all workplaces. This will require change at a European level.

• Allow firms to give rewards under the small benefits exemption on a cumulative basis and extend BIK benefits on a temporary basis. The small benefits exemption provides significant support for local economies by allowing firms to boost worker spending power.  As it stands only the first small benefit to a total value of €500 is allowable under the exemption and the total benefit given must be less than €500. From 2021 the SBE should be moved to operating on a cumulative basis, allowing firms to give smaller benefits throughout the year and making the first €500 of any reward which is greater than €500 allowable.

•  In addition, the state should introduce a one-time extension of the small benefits exemption to benefit-in-kind to allow employers to give a voucher in 2020 or 2021 up to the value of €2,000, on a tax free basis.

• Introduce measures to address Covid-19 tax debts. Excess debt is proven to slow investment, productivity, and growth in SMEs. It is imperative that supports are put in place which ensure as low a debt burden as possible. If SMEs are left with significant balance sheet damage, this would represent a significant blow to the growth potential of the most labour intensive sectors of the economy. 

• The state should introduce a fund to write down debts under the Revenue tax warehousing scheme where they threaten business viability.

Ibec's full Budget submission is available here.

Photo: Representatives from Cork event businesses have launched a national week of awareness for the beleaguered sector. A spokesperson commented: “We were the first to close and will be the last to reopen. Our colleagues do not want the wage subsidy, they want to work, but we are not even included in the roadmap for reopening businesses.” (Pix: Michael O'Sullivan / OSM Photo)