Saturday 1 October 2016

Big thinkers and their smart ideas for this week's Budget

Budget 2016 promises to be the biggest giveaway since the financial crisis began. There'll be cuts to personal taxes and boosts to capital spending as austerity measures are pared back ahead of the election. But are we squandering the gains of the recent years? And could Michael Noonan use taxpayers' money in a smarter way to create jobs and help businesses? Some of the shrewdest minds in Irish business may have come up with innovative new ideas that could make a difference. They talked to Business Editor Nick Webb, Sarah McCabe and Gavin McLoughlin

Nick Webb, Sarah McCabe and Gavin McLoughlin

Published 11/10/2015 | 02:30

Minister for Finance Michael Noonan is expected to deliver some business-specific changes in Tuesday's Budget, alongside the much-hyped reduction in income tax, which should affect employees' take-home pay - boosting consumer demand and economic growth Photo: Tom Burke
Minister for Finance Michael Noonan is expected to deliver some business-specific changes in Tuesday's Budget, alongside the much-hyped reduction in income tax, which should affect employees' take-home pay - boosting consumer demand and economic growth Photo: Tom Burke

Anna Malmhake: Manufacturing & exports

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Chief executive of Irish Distillers Pernod Ricard

"For us the single most important change is the creation of a level playing field in terms of excise duty on spirits.

"Ireland has the third highest excise duty in Europe for spirits. A bottle of Jameson is one third more expensive to buy in Ireland than it is in New York; tourists come to Ireland and face paying more for this product than they would at home.

"We would like the government to ensure that the excise duties levied in Ireland are more in tune with the rest of Europe. That is our key ask - a level playing field."

Paul Stanley, Banking

Interim chief executive of Ulster Bank

"I'm looking forward to a Budget that will hopefully put some money back in our customers' pockets and also invest in some business areas in which Ulster Bank is seeing growth and potential.

"Outside of the major urban centres, we're seeing this in agriculture, tourism, the marine and renewable energy. These are important industries for employment and export markets and I would particularly like to see measures in the Budget to support younger farmers and young business people.

"Outside of this, we are doing a lot of work with HPSUs (high potential start-ups) and the Government's continued recognition and support of this area is crucial to maintain our international footing as a centre of excellence for start-ups and incubation.

"Sustaining our economic revitalisation hinges on confidence and I think the Government has a real opportunity in this Budget to encourage consumers to have more belief in our recovery."

Niamh Townsend, Multinational

General manager for Dell Ireland

"I'm looking forward to a budget that is pro-business and continues the legacy of this Government when it comes to supporting entrepreneurship. That is a priority for us at Dell - we work with a lot of early-stage firms through our 'Dell for Entrepreneurs' programme, and any new supports would be widely welcomed by a start-up community which remains very vital in this country.

"I spoke at a number of events this week for the Start-Up Gathering and the enthusiasm, energy and ideas around the country is impressive.

"Support to enable companies to grow, scale and commercialise internationally is needed now to turn ideas into credible businesses.

"The next generation is a key priority and it would be fantastic to see some more progress in the area of IT for schools. The launch of the digital strategy this week sets out a vision, we need to ensure that this gets the funding that it needs. We need to think long-term about the workforce of the future and equipping people with coding and development in schools as a core part of the curriculum is important."

Chris Martin, Retail

Chief executive of the Musgrave Group

"Musgrave is looking to the future with renewed confidence that the recovery can be sustained with the right measures.

"Retail sales remain below pre-recession levels and taxation changes should focus on boosting consumer confidence, which in turn will help the domestic economy.

"To secure and potentially grow employment in the retail sector and to ensure Ireland remains competitive the Budget needs to continue to drive down business costs.

"It is important that small businesses are supported to maintain jobs and create new ones, and a restoration of the lower rate of PRSI would support small business owners in employing new staff and maintaining current job levels.

"Regional disparities in the recovery are of concern to us, and we want to see the recovery spread throughout the country. Musgrave and our retail partners operate stores that are at the heart of towns and villages nationwide. Initiatives to support town centre renewal are needed to recreate vibrant economic hubs.

"Finally, a renewed effort on tackling the black economy is urgently needed so that legitimate tax-paying businesses are not put at risk by illegal operations."

Bill Kyle, Insurance

Chief executive of Irish Life

"This may seem a bit unusual, but my idea for the Government is a suggestion to not do something! I believe that the commitment to move ahead with an 'auto-enrolment pension' is premature as it is a solution that fails to address the main issue with Ireland's pension system.

"The recent McKinsey study Is Ireland's population ready for retirement? shows that Ireland compares very favourably with other OECD countries for preventing poverty in retirement.

"Surprisingly it is middle and upper income families, especially those not in a workplace pension, who are facing a significant deterioration in their lifestyle post retirement.

"But more concerning is the unsustainable funding of the State pension. At current funding levels, benefits would need to be cut by 35pc or contributions from all workers increased by 5pc to maintain the current level of benefits.

"If the benefits were so reduced, the percentage of the population who are ready for retirement would fall from 71pc currently, to below 50pc.

"Given these findings it is critical that the Government share these facts widely and start a debate on how to preserve a system that is the foundation of Irish people's retirement expectations."

John Tuohy, Logistics

Chief executive of Nightline Group

"Over the course of nearly two decades, we have seen continuous growth in our turnover and, as a result, the number of people who we employ.

"However, that process is not without its challenges, especially for a business like ours, which is acutely aware of transport costs.

"Our self-employed owner-drivers have already seen considerable increases in motor insurance premiums this year.

"Any rises in transport-related taxation next week - such as that for registering new commercial vehicles or the rate of excise on diesel - would naturally be of concern.

"The economy is returning to health but is still quite fragile. Anything which risks choking recovery and, with it, the prospects of companies which provide goods or services so vital to the domestic economy should be avoided."

Ray Nolan, Technology

Chairman of XSellco

Serial entrepreneur Ray Nolan, who founded and sold Hostelworld.com for over €200m, believes that the Government needs to do something to help the start-up sector.

"If they do nothing, founders will eventually see the opportunity abroad and take their ideas and the jobs they create elsewhere," he suggests.

"And I don't mean folks who have already made it - I mean the hardy buck first-timer who works hard for little pay and risks everything."

David McKernan, Coffee

Managing director of Java Republic

"For the creation of jobs and the risks they take, entrepreneurs and the self-employed get very little back. There needs to be rewards and tax breaks introduced in recognition of job creation achievements.

"People going out on their own, in all sectors, should also be entitled to up to three years back on previous PAYE payments, to fund start-up costs. A proper system that awarded this money correctly and insured it was genuinely used to grow businesses would really encourage risk taking and job creation.

"This is an unforgiving country to fail in. There are no safe guards, very few incentives to going out on your own. The risks are huge - ruining your credit rating, for example - and there is very little reward unless you make it big."

David Bobbett, Manufacturing

Chief executive of H&K

H&K chief executive and majority shareholder David Bobbett feels that the budget should focus on helping entrepreneurs. He also believes that income taxes should be cut.

The massively successful specialist manufacturing group, which designs, makes and fits kitchens in fast food restaurants around the globe, generates 99pc of its business abroad.

Despite this, Bobbett says that he is taxed at a far higher rate in Ireland than he would be if he was resident in another country.

Mark Kennedy, Professional services

Managing partner at Mazars

"As the Government prepares for Budget 2016, Mazars believes the Government needs to encourage entrepreneurship.

"The Irish tax system is not very attractive from a risk and reward scenario. Income can be taxed at rates in excess of 50pc while Capital Gains Tax (CGT) is 33pc and Capital Acquisitions Tax (CAT) is also 33pc.

"Our nearest neighbour and competitor, the UK, has a 10pc CGT rate on certain sales of shares by entrepreneurs and this is very enticing compared to the Irish rate of 33pc.

"The Government should introduce a more generous system of tax relief under the EIIS (Employment Investment Incentive Scheme). A robust EIIS which is attractive to investors with an initial tax break at 40pc and no CGT on a sale would encourage greater investment.

"The EIIS is potentially a great mechanism to capitalise and support Irish corporates who want to grow and expand and with some changes could be very successful".

Conor Whelan, Retail

Chief executive of Eason, chairman Retail Ireland

"The retail sector has been at the sharp end of the recession - we've had 40,000 job losses, we've had a 25pc reduction in sales from the peak and about 3,500 retail businesses closing.

"Obviously we acknowledge that we've had 12 months of modest but sustained recovery in the value of retail sales, which is positive, but it's modest and it's fragile - not all boats are rising.

"This budget is important to maintain the recovery in the sector, to keep consumer sentiment where we want it to be.

"Obviously not surprisingly we're calling for further reductions in the income tax burden, specifically a reduction in the marginal rate. Like others, we've looked for an increase in the entry point to the marginal rate also.

"Specifically from the retail sector, we've looked for government support to incentivise Irish businesses investing in e-commerce.

"We're a long way behind our international counterparts and many people would say that the large e-commerce giants have sort of eaten everybody's lunch at this stage.

"So we've a long way to catch up - and we believe that Irish businesses, particularly the small and medium enterprises, need investment support in that regard.

"The recovery of shopping centres and town centres like the Dundrums and the M50 belt has been much faster - and obviously we see that at Eason, where our stores right across the M50 are recovering at a faster rate than our town and city centre stores.

"We've asked the minister in our budget submission to consider the creation of a town centre fund that would fund the likes of the appointment of town managers who would coordinate all of the relevant stakeholders, bring them together.

"Because there's no magic wand to fix all of this, you really need all of the stakeholders involved in our towns and cities to come together and work as a team to drive the commercial vitality of the country's towns and city centres."

Amanda Roche-Kelly, Food

Managing Director at Just Eat Ireland

"It will be important that the decisions made in the Budget help to underpin and support the early stages of growth that we are seeing in the economy and don't do anything to undermine the fragile consumer confidence that is slowly being restored.

"To ensure a sustainable recovery we need people back out spending in their local towns and communities.

"As a business that is close to the consumer we are seeing an increase in discretionary spend again, but it is not distributed equally across the country. It will be important that after the Budget people start to feel the benefit of the national recovery in their own homes, so changes to personal taxation would be welcome.

"At Just Eat we work closely with our 1,700 restaurant partners throughout Ireland - the vast majority of these are independently-owned small businesses.

"These are companies that have had a very challenging time over the past five years but through commitment to quality and customer service they have managed to retain customer loyalty and support.

"I would like to see measures in the Budget which support small businesses and entrepreneurs and don't penalise people who are self-employed and creating valuable employment in rural towns.

"Finally, as a nation known for its leadership in technology, measures that would enable start-ups to grow and scale from Ireland would be great. As a digital leader we meet many young start-ups in the technology space, really creative app ideas and online propositions.

"It would be great to see further incentives and supports to help young companies in the research and development and set up phase."

Eoin Clarke, Financial services

Managing director at Switcher.ie

"Independent research commissioned by Switcher.ie found that over half of households (61pc) say they were cold at home during last winter.

"Hardship remains - almost three quarters of people (69pc) have cut down or rationed their energy use during winter due to cost. Over one in four people (26pc) always or regularly went without heating last winter to keep energy costs down. Fuel poverty is a reality in many Irish homes.

"A significant investment by Government is needed in new and effective energy efficiency programmes to address fuel poverty, such as revised building regulations, efficient boiler regulation, the rollout of smart meters, impactful insulation programmes and better energy financing to build on current programmes and support the thousands of people struggling to pay their energy bills.

"While the National Broadband Plan has been prioritised by Government, further allocations for the programme in Budget 2016 would help address harder-to-reach areas in rural Ireland, unserved by commercial operators.

"Sufficient funding must be made available to deliver high-speed broadband to every home and business in the country by 2020, to effectively bridge the digital divide that exists in Ireland."

Martin Keane, Tourism and hospitality

Owner of the Oliver St John Gogarty

"I'd like to see the homeless people being looked after in the centre of the city. It's a pity to see them going around and I think something should be done about it.

"I would also like to see better resources being given to the police to help with the violence and the drug problems in Dublin.

"And I would also love to see something being done for heritage buildings, we have such a fine city and after the Celtic Tiger a lot of them have fallen into disrepair and disuse.

Michael Costello, Professional services

Managing partner at BDO

"I believe that the current 33pc rate of CGT acts as a disincentive to entrepreneurs and business owners to realise value from their businesses. This disincentive also reduces the capital and appetite for investment, the very investment that's needed for growth, jobs and wealth creation.

"An overlooked consequence of a high CGT rate is the blockage it creates for the necessary evolution in business ownership. Business owners and family businesses should not be excessively penalised for transferring ownership to the people who can drive future growth and development.

"A lower rate of CGT will stimulate corporate activity, producing faster growing businesses, produce a fairer net return for entrepreneurs and business owners and, as we know from experience, significantly increase the tax yield. For Ireland to be competitive we need a 10pc rate for smaller transactions and a top rate no higher than 25pc.

"I know the minister is in favour of a change, however my fear is that the change will be too little and too slow to make a real difference. A reduction to a 30pc rate with the promise of more to come in the future would be a badly missed opportunity."

Philip McNamara, Outsourced customer services

Managing director USA at Voxpro

"Over in Silicon Valley there's a lot of young ambitious start-ups. But I think it's a little bit harder to do that in Ireland, mainly because of the lack of funding.

"In the past Ireland has had huge equestrian success because there was a tax-free deal done for horses. That led to a huge equestrian industry in Ireland. We could do the same thing for drones, and UAVS (Unmanned Aerial Vehicles) where you say: 'If you're developing a UAV industry, we'll give you a tax-free status on profits for say five years, whatever it is, to bring companies in.'

"If you look at the investment that was put into Shannon Airport in the 1950s, that investment decision led to the duty-free industry, it led to the aircraft leasing industry, and it led to half of the world's aircraft leasing companies setting up in Ireland today.

"Ireland has this huge rich heritage of working with aircraft leasing, and that can be translated into drones as well."

Wim Verbraeken, Banking

Chief executive of KBC Bank Ireland

"For the first time in many years, the Budget is anticipated with a sense of hope rather than apprehension.

"The Budget must seek to foster and build confidence that the worst is firmly behind us and the future is altogether more promising.

"Difficult but necessary measures in recent Budgets have put the public finances on a healthier path and it is crucial that plans for public spending and taxes in coming years sustain this progress.

"In a generally uncertain world, we must avoid mistakes that could require a return to sharp adjustments in public services or taxes in the future.

"It is also vital that the Budget 2016 sends a clear signal that we are now at the point where some modest 'payback' can be envisaged. I say modest because we must avoid unrealistic expectations becoming established if the recovery is to be sustainable.

"Overall, I hope to see a Budget that encourages Irish consumers and businesses to take the view that they can now plan for a brighter future."

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