Budget 2016: The expert reaction from the business world
SOME of the smartest names in business have crunched the numbers and assessed the measures in the budget. What works? What doesn’t? And what should have been done instead?
They give Sunday Independent Business Editor Nick Webb their reaction to this government’s last budget before the election:
David Dempsey Executive Director and Senior Vice President of Salesforce:
“Overall, this budget is a business-friendly budget. It is crucial that the Government places a continuing emphasis on digital skills. I believe that the establishment of digital apprenticeships would be a good solution as they would allow the tech sector to meet its recruitment needs in the same way as they do for the traditional industries in which apprenticeships operate. This would also benefit the SME sector and the wider economy. Further, the Department of Education must continue to focus on the promotion of STEM as it has done successfully to date, and support for early stage coding initiatives would also be helpful in this context. The IT sector continues to grow strongly and to create new jobs in Ireland; hardly a week goes by without an announcement of a new investment by the tech industry. However, we need to ensure a talent pool of suitably qualified people with the rights skills to fill these roles as the opportunities arise.”
Gary Ryan, Managing Director, Energia Retail:
“Not surprisingly Budget 2016 is very focused on winning over voters ahead of next year’s election. Having said that, from a business point of view, we were delighted to see the new measures designed to make it easier for young mothers to return to work. The extension of the Early Childhood Education Scheme, the creation of 8,000 additional places on the Community Childcare Subvention Programme and the increase in child benefit will all help in this regard.
“As we supply energy to both businesses and homes around Ireland, a couple of measures caught my eye. It was good to see SMEs receiving support in the shape of a new tax credit, a more attractive CGT rate and reduced motor tax for large commercial vehicles – SMEs are driving employment and economic growth and a significant customer group for Energia. We also welcome the 10% increase in the weekly fuel allowance to €22.50, as a positive contribution to address the issue of fuel poverty.”
Shane Crilly, Owner of Base Woodfired Pizza
Shane Crilly is the brainchild behind the hugely successful Base Woodfired Pizza chain in Dublin. A former solicitor Shane set up the company in recession-time Dublin in 2008 and now employs 100 people with three stores in Dublin and another store to open in January. Commenting on today’s budget, Crilly stated, “The fact that the universal social charge will range from between €365-1,000 extra a year depending on income is good news for my business as people will have disposal income for things like a pizza and bottle of wine. I think cuts needed to be made to the high level of taxation in Ireland as many of my customers have seen the money they have at the end of the month annually decrease since I first started in business. I’m glad that’s beginning to turnaround.”
David Walsh, CEO, Netwatch:
The recent international tax competitiveness index 2015 ranked Ireland 10th and the UK 11th overall in the OECD. The introduction of a Knowledge Box will improve our tax offering and enable us to compete more effectively against the UK. It will hopefully encourage more R&D activity in Ireland and the registering of intellectual property here. However while the reduction in Capital Gains Tax is a welcome move in the right direction, it remains uncompetitive when compared to the UK, where a 10% CGT rate is levied on gains of stg£10 million.
The rebalancing of personal taxation for self-employed is welcome – it does not make sense that an entrepreneur would have a lower take home pay than an employee earning the same gross salary. However, the USC rate for the self-employed earning over €100,000 should be reviewed in the Finance Bill.
Shane Lonergan, Owner of Lonergans Pharmacy & Health Store in Walkinstown
“As a small retail business owner, I was happy with certain measures including the changes to USC rates; the reduction in the debit card charge; and the alternation of employers’ PRSI. More broadly, I was disappointed that the Medical Card Levy and the Drugs Payment Scheme threshold were not addressed as this would have had a positive knock-on-effect to patient adherence to prescribed medicines. Improved access to GP care for children under 12 is a major development. The most positive implication of this being that it will improve the likelihood of early intervention by health professionals in the diagnosis and management of serious health conditions in early life. The increased in tax credits for carers in the home is a positive move in an area that requires further investment to relieve pressure on secondary care services, as is the restoration of the respite carers’ grant to €1700.”
Brian Crowley, CEO of TTM Healthcare
Recruiting healthcare professionals for the Irish health service is challenging as we are competing internationally for skilled medical personnel. The Budget reductions on USC will make Ireland more attractive for candidates, especially nurses, thinking of relocating here, but the benefit will have less impact on higher paid consultants who we are also trying to attract here.
The intent to increase funding generally for the health service is also very welcome.
As an Irish entrepreneur with over 200 permanent employees and 1,000 temporary employees in Ireland, I welcome measures to encourage risk taken and innovators. I also commend measures that make Ireland a more attractive place in which to work and invest. A €550 tax-credit for the self-employed offers security and rewards risk-taking, as does reduced Capital Gains Tax for entrepreneurs. The new Knowledge Box 6.25% rate of Corporation Tax for companies investing in R&D also stimulates Irish innovation.
Reducing the tax burden on work encourages people to get a job, to progress in their career and to start new business. That activity in turn can generate more revenue for funding vital public services.
Audrey Lydon, Head of Private Client Services Ernst & Young
“Entrepreneurs will welcome the introduction of a reduced CGT rate of 20% on the disposal in whole or in part of their business up to an overall limit of €1m in chargeable gains. But, they will have to wait for the Finance Bill next week to understand what conditions need to be satisfied to qualify for the reduced rate of CGT.
“While this is a step in the right direction, the 20% rate is still double the rate that applies to entrepreneurs across the border in the UK. UK entrepreneurs also have the benefit of a £10m chargeable gain limit compared to just €1m under the budget proposals. Practically, what this means is that once Irish entrepreneurs personally extract value from the business they will suffer CGT at 33% on amounts over €1m, whereas UK based entrepreneurs can enjoy a rate of 10% up to £10m and 28% on the excess.
“A form of rollover relief for entrepreneurs whereby CGT is deferred until the replacement investment is disposed of could have been more effective in encouraging reinvestment by serial entrepreneurs.”
Mark Redmond, Chief Executive, American Chamber of Commerce Ireland
Central to Minister Noonan’s budget yesterday was a commitment to ‘boost productivity, foster innovation and remove barriers to employment.’ This is an ambition which will be welcomed by the 700 US companies who employ over 140,000 people in this country.
The measures announced will also be welcomed by the Irish taxpayers and will improve consumer spending in the economy. From the standpoint of the FDI the reductions in the USC rates will help Ireland to retain and attract talent. We would like to see this trend in personal taxation continue through successive Budgets - as this will improve the case for investing in Ireland.
Multi-nationals are increasingly engaged with local enterprise and start-up ecosystems, so the measures announced today to promote entrepreneurs are very welcome. The introduction of a new tax credit, plus the commitment to continue increasing this in future Budgets, coupled with the changes to capital gains tax, will encourage more people to start their own businesses which will resonate internationally.
These and other measures such as the updated International Tax Strategy are business and investment friendly measures, as they bring tax certainty to the fore, which is easily understood by the people making the decisions to locate their businesses outside of the US and elsewhere – important decisions to an economy such as ours, which has always performed well in delivering FDI into the local economy.
Ireland has always excelled when it comes to attracting Foreign Direct Investment. However we must always to give ourselves every possible advantage, particularly in the face of increased global competition. This will be best achieved by focussing on innovation to drive economic growth in Ireland.