Wednesday, 9 October 2019

Ceisteanna (3)

Robert Troy

Ceist:

3. Deputy Robert Troy asked the Minister for Business, Enterprise and Innovation the measures in budget 2020 to reduce the costs of doing business, reverse competitiveness deficiencies and create a more attractive environment for entrepreneurs here; and if she will make a statement on the matter. [41307/19]

Amharc ar fhreagra

Oral answers (6 contributions) (Ceist ar Business)

Will the Minister outline the measures she achieved in budget 2020 to reduce the costs of doing business, reverse competitive deficiencies and create a more attractive environment for entrepreneurs in Ireland?

I thank the Deputy for raising this matter. Notwithstanding our strong economic growth, addressing Ireland's cost competitiveness remains a key economic priority for Government and we continue to monitor Ireland's cost base and analyse the factors that are crucial to improving our cost competitiveness.

Our competitiveness is reflected in a range of economic metrics such as high economic growth, the performance of the labour market across sectors and regions, strong export figures and our productivity figures. For example, the labour force survey shows there was a 2% increase in employment in the year to quarter 2 2019, bringing total employment to 2.3 million, the highest number on record. In quarter 2 2019, there were 130,800 people unemployed, a decrease of 9.4% compared to the previous year. However, our strong competitiveness position, with the IMD ranking Ireland at 7th out of 63 economies, cannot be taken for granted. There is no room for complacency, which is why improving Ireland’s competitiveness position is a key priority for this Government.

The Cost of Doing Business in Ireland 2019 report and the Ireland's competitiveness scorecard 2019, published by the National Competitiveness Council, NCC, found that while Ireland is a high-cost economy and the fifth most expensive in the EU, the cost base for enterprise is internationally competitive across a range of metrics, for example, the cost of starting a business, communications costs and average income taxes.

The 2020 budget, announced by the Minister for Finance and Public Expenditure and Reform yesterday, aims at protecting the economy’s resilience in the face of Brexit and other international uncertainties. The €650 million contingency provision for a no-deal Brexit will enable me to introduce a number of specific measures to support companies to remain viable and competitive. The budget continues this Government’s careful, stability-oriented approach to the management of the public finances, which is essential to preserve the economy’s competitiveness. In line with Project Ireland 2040, the budget provided for significant increase in capital investment which will support the expansion of our infrastructure across key areas, thus supporting the economy’s resilience and competitiveness.

I thank the Minister for her reply. Small firms are the backbone of the economy and supporting them helps create and sustain jobs across the regions throughout the country. Earlier this morning, the director of the Small Firms Association said that budget 2020 is disappointing in that it did not recognise the importance of small firms by introducing ambitious measures to support entrepreneurship. Our cap on qualifying gains for capital gains tax, CGT is €1 million, which is out of sync with the UK where entrepreneurial relief is available for gains up to £10 million. We are ranked 23rd in terms of competitiveness according to the World Bank, which is quite low down the scale. Given that the NCC comes under the Minister’s remit, of the 121 recommendations published by the council in its 2018 annual report, will she update the House on the number of those that have been completed? Is there an actionable timeline for the implementation of those recommendations and is that available to Members?

Ireland has made progress in recent years to improve its capital tax offering to entrepreneurs. The capital gains tax, CGT, entrepreneur relief was introduced in budget 2016 and provided for a reduced rate of capital gains tax of €20% for entrepreneurs - that was down from 33% - subject to a lifetime threshold of €1 million in gains and to meeting certain criteria. The relief was further enhanced in budget 2017 when the reduced CGT rate applicable was further lowered from 20% to 10%. The review carried out by Indecon economic consultants found that the relief should be retained and presented a range of options which could be considered for its enhancement. However, Indecon found to increase the lifetime limit in the manner advocated by most commentators would increase Exchequer costs but would be unlikely to be cost effective with the minimal impact on reinvestment. The Minister for Finance signalled in his Budget Statement yesterday that he had asked his Department to consider the outcome of the review with a view to determining any changes that could be made to the relief to better support entrepreneurs and entrepreneurial activity.

The Minister cannot have it both ways, namely saying she does not think it is beneficial while, at the same time, looking for a review of it and saying that it would be beneficial to change it and that it would be amended. If a change is proposed, it will not happen under we have another budget. This budget was a wasted opportunity in this regard. We are uncompetitive when one compares the relief offered here to that offered by our neighbours across the water with whom we will be competing on the basis of our attractiveness for job creation and the retention of entrepreneurs. That is a fact and I am disappointed the Minister does not agree with me on it.

I asked about the recommendations of the NCC. It is critical that the Minister updates the House on the implementation of those recommendations and the timeline for their implementation. Has that timeline be published? I did a thorough search and I could not find a timeline for that.

The truth of the matter is Ireland remains a high cost economic and an expensive place in which to do business, to which the Minister alluded, under all economic metrics, including property, insurance, transport, energy and business. In respect of the cost of borrowing or lending, we are 65% higher than comparable countries across the EU. It is important we are updated on the NCC's recommendations. I hope the Minister will take this opportunity to do that.

We take on board the recommendations of the NCC and I will certainly provide information on where those recommendations, many of which have been complied with, are at. I included in the Future Jobs Ireland plan a condition that the recommendations would have to be formally reported on, on a regular basis, something about which I am very conscious.

On the taxation side, budget 2020 saw the Minister, Deputy Donohoe, announce a number of measures. Changes to the research and development tax credit scheme, the employment and investment incentive scheme and the key employee engagement programme, KEEP, share options scheme will help to ensure Ireland will remain competitive and supportive as a location in which to develop ideas and base start-up businesses. Future Jobs Ireland, launched in March this year, includes a range of specific deliverables that aim to enhance the business environment and improve competitiveness. Ireland is now seventh in the IMD rankings, whereas in 2011, just after Deputy Troy's party left government, it was 24th. While we have come a long way, we are certainly not complacent. I am very conscious that we must remain competitive.