I am vice president of the Institute of Certified Public Accountants in Ireland. On behalf of the institute, I thank the Chairman, Vice Chairman and members of the joint committee for the opportunity for Mr. Siggins, Ms Shaw and myself to meet with them today.
The institute welcomes the opportunity to present our views on the regulatory environment in Ireland and how it can be improved for business. Over the course of the next few minutes we will discuss our rationale for change and highlight key areas where smarter regulation can positively impact the SME community.
The Institute of Certified Public Accountants in Ireland, or CPA, is one of the country's leading professional accountancy bodies. It was established in 1943, and has over 5,000 members and students. Some 60% of our members work in business-finance, services, manufacturing and the public sector. The other 40% are engaged in public practice. Our members work across five continents but the majority are here in Ireland.
Because of CPA's day-to-day involvement in business — particularly medium and smaller businesses — we have a valuable and relevant perspective on the effects, both good and bad, of regulation on business. Our submission is based on the first-hand experience of our members, who work both in financial positions in businesses and in public practice advising businesses.
Proportionate regulation is necessary in Ireland to protect our reputation as a safe environment in which to conduct business. In the accountancy profession we accept the need for, and implement, very stringent regulations. A good regulatory framework is in the interests of our members, their clients, employers and, critically, the public.
The high-level group on business regulation has already identified more than €20 million worth of administrative cost savings for business in its first report, through cutting out paperwork, revising the rules for small businesses and making better use of on-line services. We acknowledge this excellent progress, but there is more to do. Our principal theme is to take account of the impact of regulation on the SME sector and in our submission we have detailed specific examples of where we can do things better and smarter.
The objective for us all should be to agree a system of regulation that resonates widely and deeply with all parts of the economic spectrum, as all these issues are interdependent. There are areas in which more regulation is in the public interest, and these are detailed in our submission. Similarly, there are areas where we would question the need for regulation or the proportionality of existing regulation.
Action is clearly needed to reduce the cost burden on Irish business. We also recognise that transparency is an imperative and yet we cannot get subsumed by regulation. We must seek to achieve our objectives in a smarter, cost-effective and sustainable way that creates jobs.
The Government's recovery strategy, Building Ireland's Smart Economy — a Framework for Sustainable Economic Renewal, was produced in December 2008 and outlined the programme for medium-term economic recovery based around the concept of the smart economy.
In March 2010, the Government published Building Ireland's Smart Economy — Progress Report, which highlighted key headline progress from the wide range of policy actions and developments undertaken as part of the overall recovery strategy. We are in the midst of the deepest economic downturn this country has ever experienced. There is an accepted wisdom that this strategy lies at the heart of securing the economy and achieving competitiveness. We have a plan in place and we need to keep going and implement that plan. Smarter regulation is one of the pillars on which this report is based. In the context of this submission, CPA is not calling for anything radical or new, we are working on the assumption that we are pushing a door that is already open.
CPA has chosen the following eight areas where we believe change will positively impact on the administrative and regulatory burden on Irish SMEs; first, proportionate sanctions for non-compliance; second, availability of audit exemption to small groups. Currently in Ireland all companies in a group, regardless of their size or the size of the group must have an audit. This is at odds with the UK, for example, where the individual companies in a group can avail of the audit exemption where the group has a turnover of less than £5.6 million and a combined balance sheet total of less than £2.5 million. This sensible approach frees up the time of the business owner, and allows accountants to concentrate on strategic advice for businesses within that group. The third area relates to change in VAT registration limits to positively impact small business. We request an increase in VAT registration threshold for all goods and services to €120,000. Fourth, we request the removal of administration burden from the filing process. We encourage the fast tracking of the introduction of extensible business report language, XBRL, which would allow the electronic filing of all financial data with Government bodies such as the Companies Registration Office and Revenue. The fifth area relates to reform of bankruptcy legislation to encourage an entrepreneurial culture. We request a review of current legislation in this area and to introduce similar legislation to the UKs Enterprise Act 2002. The sixth area relates to company law for the 21st century — think small first approach. Draft consolidated companies legislation has been in existence for some time which will reform and modernise Irish company law in many areas. We urgently need to progress this legislation as a clear benefit exists for business which outweighs any cost involved. The seventh area relates to protecting the public interest by legally recognising the term "accountant". The eighth area relates to freeing up working capital — a request for an increase in the turnover limit for accounting for VAT on a cash receipts basis to be increased to €3 million.
Time prevents us going into greater depth on each issue; however I remind the committee that further background is available on all these issues in the CPA's detailed submission. The past 12 months have been challenging for the country and for business. Our members have first-hand experience of businesses in difficulty. It is important to realise that even small changes can make a meaningful difference.
Our submission sets out specific areas which must be addressed to ease the current environment in which SMEs operate. All of the issues raised can be addressed in the short term. The main goal in the immediate future must be to foster an atmosphere in which SMEs can flourish. They have been the cornerstone of economic success in Ireland. If this is to happen again, CPA urges the joint committee to adopt these suggestions as a means of supporting their endeavours.
I thank members of the committee for its attention. I will be happy to answer any questions members may have.