Budget 2013 Enterprise: SMEs tentatively welcome steps to stimulate business

Small business associations cautiously welcomed the government proposals to stimulate small businesses, but they said the elimination of redundancy rebate was a backwards step.

Small businesses remain the lifeblood of the Irish economy with more than half of the private sector workforce employed in non-exporting small and medium enterprises (SME).

The Small Firms Association (SFA) and the Irish Small and Medium Enterprises Association (ISME) both welcomed the changes in the start-up corporation tax, cash receipts for Vat and the doubling of the research and development credit, as well as the foreign earnings deduction.

ISME chief executive Mark Fielding said these measures would help re-ignite the economy.

“This budget, while necessarily harsh, has taken the first steps to kick-start the economy. While tough measures are required to balance the day-to-day books, a much more strategic approach is needed to address the underlying bank-induced debt,” he said.

The particular incentives that the business bodies were in favour of include the doubling of the amount of expenditure that qualifies for the research and development tax credit from €100,000 to €200,000, improvement to the three-year corporation tax relief scheme, as well as the foreign earnings deduction scheme which is aiming to support exporting companies establish themselves abroad.

SFA chairman AJ Noonan gave particular praise to the establishment of the venture capital funds and the move to allow people to access nearly a third of their additional voluntary contributions which had been off limits.

“Improved financial instruments, including the€175m venture capital fund, and the decision to allow the early release of up to 30% of AVCs will help some owner-managers put their businesses back on a sound financial footing and should incentivise spending in the domestic economy,” he said.

However, both the SFA and ISME strongly criticised the Government for completely eliminating the employers redundancy rebate only a year after slashing it by 45%.

“The decision to scrap the much-needed redundancy rebate altogether means that the cost of redundancy has risen by a staggering 150% in a year, negatively impacting on those businesses already hardest hit. With the number of redundancies expected to increase it would have made more economic sense to ease the cost of labour for those vulnerable businesses,” said ISME’s Mark Fielding.

The SFA called on the Government to restore the rebate to firms employing less than 50 people to the 60% level that was there two years ago.

“The SFA is calling for a small business exemption from this decision and believes the full 60% rebate should be restored for those employing less than 50 people.”

Another employment issue that SME’s will face is the knock-on effect that scrapping of the PRSI will have on wages. ISME claimed that levying an extra €261 a year on workers will inevitably result in workers looking for higher wages.

Despite the mix of measures for the SME sector that the budget delivered, both bodies said that the Government’s adjustments were in the country’s best interests. The SFA said that the budget will hamper growth, but was necessary while Mark Fielding called on the Government to continue to increase the country’s competitiveness.

“The priority for the Government is to stabilise the public finances and ensure that the economy is not overburdened by exchequer deficits to an extent that will cause irreparable damage for years to come.

“The budget has taken the first steps in the growth strategy by incentivising SMEs. Now the Government must continue with policies that will underpin competitiveness, support enterprise and instill confidence, both domestically and internationally, in an economy that has the potential to grow,” he said.

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