Budget will not encourage business growth, says SFA

The assistant director of the Small Firms Association, Avine McNally has said that the overall thrust of today’s budget has failed to make the strategic alignment that the economy needs at this time.

"This budget has increased taxes, fails to reduce expenditure and provides for no public sector reform," said SFA assistant director Avine McNall.

"It is particularly disappointing that the Minister for Finance has failed to advance any reductions in public sector numbers, while at the same time has increased tax burden on the small business community."

The SFA believes that the Minister has missed an opportunity to boost consumer spending, by the imposition of increasing the standard VAT rate.

"In practice, this increase will not only impact on inflation, but will further impact on consumer confidence and slow down consumer spending.

"This VAT increase will also have a huge impact on those companies operating in the international marketplace, as our current VAT rate (21%) is significantly out of line with competitor countries."

“Ireland currently has the highest ‘reduced rate’ of VAT, at 13.5%, and the third highest ‘standard rate’ of VAT at 21%, being surpassed only by Sweden and Denmark at 25% and Finland at 22%, in the European Union.

“With the increase in on-line purchasing, which knows no borders and the current strong euro, we need an incentive for people to continue buying in Ireland, thus supporting the economy and jobs here.”

While the SFA welcomed the Minister’s commitment to retain the 12.5% rate of corporation tax, it is disappointed at the change the Minister has made in relation to the payment schedules at a time when the business community is being starved of working capital.

“The increases in indirect taxes will fully exacerbate the difficult cash flow situation which many small firms find themselves in and it may result in reduced investment and expansion by small businesses, due to lack of capital,” said McNally.

The SFA raised concerns regarding the increase in Capital Gains Tax, while the reduction only applies to commercial properties and also on the income levy.

"The 1% income levy applied to individuals earning up to €100,000, is a particular harsh burden and will impact unfairly on those individuals on moderate incomes,” stated McNally.

The SFA welcomed the ongoing capital investment programme including commitments under the National Development Plan, and commented that “it should ensure that Ireland improves its ranking in the World Competitiveness League, which is significant for both foreign direct investment and indigenous business prosperity".

The specific measures for energy efficiency measures in industry and the improvement in the R&D tax credit scheme were fully endorsed by the Small Firms Association.

“The primary rationale in delivering this year’s Budget should have been to create an economic environment which is conducive to business growth and restore consumer and business confidence as well as having a non inflationary impact, on this occasion we do not think this has been achieved,” concluded McNally.