ISME has issued our Pre-Budget 2022 Submission to Government. While Ireland looks toward the final stages of the Covid-19 pandemic, it is clear that many business sectors in Ireland will not return to 2019 levels of trading until well into 2022, and that there will be legacy debt and trading issues which will threaten the commercial viability and solvency of many SMEs.
The Central Bank estimates that up to 25% of SMEs are struggling financially[i] and as a result, ISME in its submission, has outlined the direct-to-business supports required throughout 2022 to keep these businesses and related jobs afloat.
Working under the assumption that Ireland will have exited the pandemic-induced recession in 2022 but will suffer considerable residual effects, ISME has set out a number of priorities. These include:
- Extend fiscal life-support to SMEs through targeted, grant-based liquidity supports.
- Implement a series of basic tax reforms including a solidarity tax. A USC surcharge of 3% should be introduced for all PAYE workers earning over €100,000 per annum, or a third PAYE rate of 43% should be introduced for the same cohort.
- Reinstate the temporary reduction in the punitive 23% VAT rate to the previous 21% level.
- Reforms on property tax, commercial rates and Local Property Tax.
- Ireland’s further education and training regime is inconsistent with activating a bigger workforce or training the unskilled. ISME also acknowledges that our domestic SME base requires extensive training to improve its productivity. This should be incentivised via the tax system like the Teagasc ‘Green Cert.’
Ross McCarthy, Chair of ISME and Managing Director of Keystone Procurement, said: “Tax reform is never an easy option, but it has never been more essential. We face huge challenges on the fiscal and climate fronts which can no longer be ignored. Business rarely wants more tax, but the situation Ireland finds itself in now requires all PAYE workers earning over €100,000 to bear the same tax burden as the self-employed. We must reform our property taxes, move to site value taxation, and charge a premium for development with road frontage. Ireland’s increasing energy needs require radical, not incremental thinking. Access to affordable housing is the single greatest need for our young workers. We can no longer tolerate the public virtue of politicians calling for house-building alongside the private vice of objecting to all local construction.”
As stated in last year’s pre-budget submission, now is the time to spend, particularly on long-term capital-intensive projects in green energy infrastructure, such as offshore wind and Green Hydrogen; and social housing as value for money will not be there when asset prices start to rise again. In the short term, running a negative primary balance is not merely warranted, it is essential.
We have gone through one full economic cycle without any meaningful reform of the tax code. ISME believes that reform is long overdue, and has provided 18 recommendations for these reforms that include a solidarity tax, reform to both VAT and Property tax, and extension of the Start-Up Refunds for Entrepreneurs (SURE) scheme.
ISME is also calling for policy changes to eliminate the ‘Jobs Kill Zone’ for low-income workers. In April 2021, ISME issued a report highlighting the impact of government policies on the decision-making of low skill workers with regard to work. The ‘Job Kill Zone’ report highlighted how the interaction of policies on tax and other deductions for workers in the income range from €18k to €30k per annum have made working unattractive for many in this income zone.
ISME is again asking for tax incentives to be green-lighted to encourage participation by all business owners and managers in a basic business qualification to be known as the ‘Blue Cert.’ The ‘Blue Cert’ is a proposed programme of training and development for SME managers and owner managers. It is specifically designed to give SME managers a broad range of necessary knowledge and skills to perform their business activities and manage their businesses in a safe, ethical and professional manner.
Read ISME’s Pre-Budget Submission 2022, here