Written Answers. - Small Business Recommendations.
Mary O'Rourke
Question:
268
Mrs. O'Rourke
asked the
Minister for Enterprise and Employment
the number of recommendations of the Task Force on Small Business which have been implemented; if he will give details of these recommendations; if he will specify the recommendations which remain to be implemented; and the progress, if any, made in this regard.
[2037/97]
The small business task force made 121 recommendations in its report which was published in March 1994. To date, 39 of the task force's recommendations have been fully implemented, details of which are given in schedule I.
While the balance of the task force's recommendations remain to be fully implemented, substantial progress has been made with the partial implementation of a further 29 recommendations. These are listed in schedule II.
The systematic examination and implementation of the recommendations is being pursued by the small business and services division of my Department, which has assessed all of the recommendations and is actively pursuing their implementation. In addition, the small business and services forum which I established to advise me on policy issues concerning the development of small business and services, in consultation with the small business and services division, has recently examined those recommendations which remain to be fully implemented and has listed a number of the areas for priority attention during 1997, including prompt payments, administrative simplification, and taxation.
I am satisfied that, building on the work which has already taken place, very significant additional progress will be achieved in 1997 in implementing the recommendations of the task force.
SCHEDULE I
Recommendations of the task force report on small business which have been fully implemented.
1. Remove or substantially relax the conditions in respect of the tax refunds for the new enterprise scheme — the seed capital scheme — that applicants are required to show that 75 per cent of their income for each of the three years immediately prior to the incorporation of the new company must have been derived from schedule E — PAYE — and also that they receive no more than £5,000 in taxable income from other sources in each year.
The 1994 Finance Act substantially relaxed the rules concerning the sources of an individual's income for the purposes of the seed capital scheme by: 1) abolishing all restrictions in the year immediately prior to the year of assessment in which the individual invests in the company and 2) the introduction of a revised limitation in respect of each of the three years of assessment immediately preceding the year of assessment referred to at 1 above, the amount of income which may be derived from sources other than employment to the lesser of (a) an amount equal to the employment income, or (b) £10,000. The 1995 Finance Act further increased the figure of £10,000 to £15,000.
2. Restore the £21 million allocated to the CEBs in the national plan 1994.
The levels of expenditure proposed by the then Government in 1993 under the national development plan were subsequently revised in the light of the completion of negotiations with the European Commission on the Community Support Framework 1994-1999 and agreement on the financial allocation for the three main strands of the OP for local urban and rural development. Since 1995, expenditure on the county enterprise initiative has exceeded £20 million per annum and has consistently exceeded the levels of funding for the sub-programme in the OP financial plan.
3. Extend the period within which tax relief can be claimed on corporate donations to First Step and Enterprise Trust.
Tax relief has been extended in two-year cycles under various Finance Acts to First Step and Enterprise Trust since their inception, and will continue to June 1997 in the case of first step and to the end of 1997 in the case of Enterprise Trust. The question of renewal will continue to be examined in the context of the relevant Finance Acts.
4. Consideration should be given to proposals from First Step and Enterprise Trust for limited matching funds from the Exchequer, perhaps via the operational programme.
These organisations have been allocated funding under a new venture capital programme which was introduced under the industry operational programme.
5. Assess adequacy of venture capital sources in 1995, address any significant gaps that may still exist.
Venture Capital scheme became operational in May 1996.
6. Encourage emulation of the Smurfit fund.
The Smurfit Jobs Creation Enterprise Fund is being expanded with the aid of EU funding under the operational programme for industrial development 1994-99, venture capital scheme. This measure will also assist a number of other venture capital funds.
7. Develop a business introduction service which would seek to bring together potential investors and investees.
Forbairt has developed a register of potential investors — Business Angels — which is directed mainly at prospective investors in the manufacturing and internationally traded sector. In addition, funding was approved under measure 5 of the small business operational programme for the Chamber of Commerce of Ireland project entitled "Invest in the Best", the specific aim of which is to introduce investors and investees. That project has recently commenced.
8. Ensure maximum possible amount is secured from new EIB scheme for SMEs.
Discussions held to maximise loans under this scheme which is administered by ICC and AIB.
9. Government should encourage banks to lower interest rates schemes and if banks respond positively should consider providing a more favourable tax treatment for loans of this kind.
Lower interest rate schemes have been introduced by most banks since 1994. The bank levy was removed from the banks in 1994 and in return the banks have taken a more positive approach to the SME sector.
10. Government should discuss personal guarantees with banks. Invite proposal re effective safeguards for family homes.
The four clearing banks and ICC no longer seek the family home as security for business loans.
11. Ombudsman for credit institutions should be extended to cover incorporated business with a turnover of £100,000 or less.
Announced in October 1994.
12. Banks should emulate codes of practice introduced by Bank of England to govern relations with their small business customer.
Codes of practice introduced by the Irish Bankers Federation on behalf of all banks in October 1995.
13. Establish representative forums for small business customers in the main banks.
Fora set up by the four main banks by 1995.
14. Extend the scope of rollover relief.
Under Section 66 of the Finance Act, 1994 all business except financial intermediaries are covered by rollover relief. Further changes were made under the 1995 Finance Act to relax some of the conditions which apply to rollover relief on equity investment by entrepreneurs.
15. Encourage employers with aid of employer associations to institute prompt payment code.
Prompt payment code has been launched by IBEC.
16. Increase the frequency of tax returns for self-employed on a more frequent basis by direct debit.
A new direct debit facility for the payment of preliminary tax under the self assessment system was introduced in the 1995 Finance Act.
17. Businesses with an annual turnover below £40,000 should be allowed to submit three-line accounts.
The Revenue Commissioners introduced a simplified form BP1 which is essentially a three-line account which has been expanded to give guidance as to what constitutes assessable recepits and allowable expenses on 6 April 1996. This new form covers the 1995-96 and succeeding tax years.
18. Introduce single registration form for all tax purposes.
The Revenue Commissioners have introduced two types of single registration forms, one for companies and the other for sole traders-partnerships.
19. Introduce a single tax clearance certificate for public sector contracts which will be renewable on an annual basis.
Announced by Minister for Finance in August 1994.
20. The Revenue Commissioners should examine the information required in the monthly VAT control statement with a view to reducing the administrative burden on small business.
Abolished by Section 132 of Finance Act 1995.
21. Recognition for a new category of VSEs should be sought from EU in order to permit a reduction in regulatory requirements on firms with fewer than 20 employees.
The European Commission adapted a recommendation on 3 April 1996 which, for the first time, set out a common and coherent definition of what constitutes an SME. This definition recognises a new category of VSEs by specifying that a business with less than ten employees will be considered a very small enterprise.
22. A start-up business with fewer than 20 employees to be required to complete a simple safety statement for the first two years of operation.
Model safety statement aimed as small low-risk employments issued by Health and Safety authority in July 1994.
23. Duty to take reasonable care should be reenforced on employees. Responsibility should not rest with employers alone.
Duty to take reasonable care is enforced on employees through the Health, Safety and Welfare at Work Act, 1989 — Section 9. There is provision in the Act which makes it an offence, punishable by a fine, for a person to fail to discharge his duties under Section 9.
24. FÁS should provide short evening or weekend information seminars about starting a business, aimed at everyone.
FÁS has developed a programme "Building Business Today" which is focused at anyone considering starting a small enterprise or those already trading.
25. FÁS to provide evening and weekend courses on developing a business aimed at owners of established businesses.
FÁS services to industry division provides evening courses for small businesses wishing to expand and also provides evening-weekend management development programmes for clusters of companies.
26. Specialised training should be provided by clustering companies in groups of around ten, for programmes designed to tackle common problems and deficiencies. It is recommended that four such pilot schemes be organised immediately and should be evaluated rigorously.
FÁS initiated a pilot company development "Cluster" programme for small business in 3 FÁS regions in October 1994 and January 1995. An evaluation of the programme in Dublin South-Wicklow found the programme to be a highly effective one and one where there is specific scope for expanison. As a result FÁS decided to extend the programme to eight of the ten regions.
27. Expand current IBEC scheme for business teachers to gain experience in industry and this should also be extended to non-business teachers.
28. There should be an increased emphasis on project work within the existing curricula in schools.
29. The mini-company initiative should be more widely implemented.
30. There should be more enterprise education in the transition year and in senior certificate programmes.
In October 1995, IBEC launched a Business and Education Links Project which aims to improve the image and increase the focus upon business within the education system and also to ensure that students emerging from the second level system are better prepared for the transition into the world of work or into further education.
In 1994, there was a restructuring of the leaving certificate applied and vocational programmes, and also the transition year.
In relation to 27, the Business and Education Links Project includes in-company placement for teachers — not just business teachers.
With regard to 28, the vocational programme includes three link modules on enterprise education, preparation for work and work experience. The applied programme has a strong emphasis on project and group work. This is also one of the main features of the transition year.
In relation to 29, the Business and Education Links Project includes mini-enterprise support. During the transition year, schools encourage enterprise and the development of business skills through mini-company projects.
With regard to 30, the Business and Education Links Project includes participation for students on company induction programmes, focused business visits, mini enterprise support, and demonstrations of learning applicable to working. The vocational and applied programmes include modules on enterprise education, preparation for work and work experience. During the transition year, schools encourage enterprise and the development of business skills through mini-company projects.
31. A new limited company to be established by Forbairt and An Bord Tráchtála to undertake the development of sales opportunities on an initial five year basis.
A new ABT-Forbairt Public Procurement Unit has been set up within these agencies under measure 2 of the Small Business Operational Programme (SBOP). This new unit was approved in September 1996 and six full-time specialists are being appointed under the SBOP on a three year contract basis.
32. The profile and professionalism of the purchasing function in the public sector must be raised.
The need to raise the profile and professionalism of the purchasing function in the public sector was recognised when the SBOP was being drafted and approved and has been incorporated into measure 2. In addition, the Irish Institute of Purchasing and Materials Management Consultants has designed a new diploma course which is aimed at improving the professionalism of public sector purchasing.
33. Reinstate the Marketplace programme, Marketing Consultancy schemes and the Techstart and Technology Management programmes.
The Marketplace programme which was introduced in 1983 continues to operate successfully.
The Marketing Consultancy scheme was introdeuced by ABT in 1989 on a pilot basis and it was never envisaged that it would be a long-term support to SMEs or consultants. There was a low level of interest-uptake in the scheme by SMEs and the scheme was not continued. The last agreement was signed in early 1994.
In 1994 Forbairt ran a much reduced Techman programme and recruited fewer graduates under the Techstart programme. In 1995, the budget was reinstated and it was possible to run more comprehensive programmes.
The schemes are all operating effectively with the exception of the Marketing Consultancy scheme, which was introduced on a pilot basis.
34. Extend the Mentor programmes especially in the context of the county enterprise boards.
The Mentor Programme has been extended in the context of the local urban and rural development operational programme and the industrial development operational programme.
35. Agreement with Telecom Eireann and ESB on the abolition of deposits and guarantees for start-up businesses.
Both Telecom Éireann and the ESB have abolished such deposits.
36. Reduce the cost of ISO 9000 Quality Standard for firms with fewer than 25 employees.
Substantial cost reductions have been effected for such firms.
37. Establish a small business division within the Department of Enterprise and Employment.
Established in June 1994.
38. Establish a Small Business Forum, comprising small business practitioners from all sectors to advise the Minister with responsibility for small business.
Set up by the Minister for Enterprise and Employment in September 1995.
39. Establish an Oireachtas Joint Committee on Small Business.
An Oireachtas Joint Committee on Small Business and Services was established in March 1995.
SCHEDULE II
Recommendations of the task force report on small business where substantial progress towards implementation has been made.
1. Simplify the tax refunds for the new enterprise scheme, remove from the BES framework and introduce a simpler more accessible scheme.
2. Extend the sectors eligible for the tax refunds for new enterprises scheme — seed capital scheme — in line with the approach proposed in section 3.3 of the task force report which proposes a three-fold categorisation of small enterprises for state support, vis-a-vis fully eligible, partially eligible and minimally eligible.
3. Increase practical business experience on the boards of CEBs and appoint two people to the supporting evaluation committees with recent experience of starting a business.
4. Allocate a mentor to all businesses that receive funding from CEBs.
5. The scope for developing the informal investment market could be assisted by developing a register of investors. This would require the co-operation of state agencies, banks, chambers of commerce and others.
6. The Government should indicate its intentions to introduce tax reforms for higher risk enterprises and, in so doing, specify a broad time frame for their implementation.
7. Repeal of section 115 which confers a kind of super preferential status on the Revenue Commissioners.
8. The PAYE allowance of £800 should be extended to proprietary directors and their spouses engaged in the family business.
9. The PAYE allowance should be extended to all self-employed taxpayers and their spouses engaged in the family business.
10. Introduce a 25 per cent corporation profits tax rate on profits of up to £80,000 returned by companies with a turnover of up to £3 million. Introduce appropriate marginal relief.
11. Introduce a 15 per cent rate of capital gains tax in respect of assets used in core business activities which are disposed of after five years.
12. Capital acquisition tax should not be applied to business assets being passed on to a family member where the business is being maintained in operation as a viable concern.
13. Legislation should be introduced to require public sector bodies to settle their accounts by the end of the month following the date of issue of an invoice.
14. Public sector bodies should also be required to give details of their payment records in their annual reports.
15. The Comptroller and Auditor General should be given a function in monitoring the payment performance of public bodies.
16. The position should be reviewed three years after the introduction of legislation in the public sector to ascertain the merits of the case for the application of similar legislation to the private sector.
17. Government contracts should from the time of the introduction of legislation in the public sector contain a clause requiring main contractors to pay their sub-contractors in accordance with the payment terms in that legislation.
18. Business with an annual turnover of up to £500,000 should be given the option of accounting for VAT on a cash receipts basis.
19. Abolish the surcharge on undistributed income of close held companies.
20. Reduce the tax burden on labour by arriving, as quickly as resources permit, at a situation in which a worker earning under £150 per week pays no income tax and pays PRSI at a rate excluding the health contribution and the employment and training levies.
21. Implement full PRSI rate for public servants.
22. The construction industry should be covered by a single tax clearance certificate, valid for one year, and the C2 form issued annually should be the tax clearance certificate for that industry.
23. Introduce a single mandatory registration threshold of £40,000 for VAT, to be increased in line with the consumer price index.
24. Statutory audit should be abolished for companies with a turnover below £100,000.
25. The legislation implementing the working time directive should as far as possible incorporate six month reference period.
26. The annual leave provisions of the working time directive should not come into effect until 1999 for business with fewer than twenty employees.
27. Establish a national business information system geared towards the needs of small businesses. It should include a telephone help-line and a walk in facility; the help line facility should be available after business hours and at weekends.
28. A small Business Act should be enacted.
29. Establish small business users' councils, whose members would be nominated by the small business forum, within Government Departments or agencies that have a major impact, or impose substantial reporting requirements, on small business. As a first step, they should be established in the Office of the Revenue Commissioners, the Department of Social Welfare and the companies office.
