SMALL FIRMS ASSOCIATION Submission to the Department of Jobs, Enterprise & Innovation on the Action Plan for Jobs 2015 September 2014
Introduction The Small Firms Association (SFA) is the voice of small business in Ireland representing over 8,500 companies and 7 affiliated organisations. The SFA welcomes the opportunity to outline some proposals and ideas that will assist our members in job retention and creation within their business. Further to our meeting in July, we now provide more details of our proposals (24 in total). As requested, these have been outlined under main theme; what will be the timeline for delivery; what will be the timeline for impact; what decisions or resources might be required to make this happen; what we believe will be the likely potential impact on job creation of this action, and who should be responsible for implementing this action. This submission should be read in conjunction with our Pre-Budget 2015 Submission. Any items included therein that are not implemented in Budget 2015 should be included in the Action Plan for Jobs 2015 for economic assessment with a view to their implementation in Budget 2016. As a general principle, we believe that every single policy emanating from Government is centrally job-proofed, as many different Government Departments have a potential impact on the cost of employment, which they may not realise or disregard in their pursuit of balancing their own Departmental budgets. The SFA is available for further discussion or clarification, as required in relation to the Action Plan for Jobs 2015. Please contact Patricia Callan, SFA Director at Tel: 01 6051602 / 087 6999345 or email: patricia.callan@sfa.ie.
Proposals for 2015 Action Plan for Jobs Small Firms Association Proposal #1 Small Firms Association Introduction of Voluntary PRSI for self-employed Introduce a voluntary PRSI rate for the self-employed which would enable them to claim unemployment benefit should their business fail. Lesser rate for start-ups in the first two years. Opt-in basis for established businesses. Driving Entrepreneurship and Start-Up Companies Within 6 months Dependent on above Cost-Benefit Analysis to be undertaken. Decision by Dept. of Social Protection to amend scheme to allow variation of PRSI Class A to allow self-employed to make a combined contribution for themselves both as an employer and employee or use international models, e.g. France. Substantial in encouraging start-ups Dept of Social Protection Revenue Commissioners
Small Firms Association Proposal #2 Extend Small Claims Remit for B2B Debts Extend the Small Claims Court remit for B2B debts from a limit of 2,000 to 15,000. This would provide small firms with a more cost effective option to pursue outstanding debts rather than the expensive process of the traditional court system. Access to Finance for SMEs Within 12 months Dependent on above The Department of Justice would need to draft and ensure implementation of the SI required. Indirect. Focus on job retention as company protected from less bad debts. Department of Justice, Equality & Law Reform
Small Firms Association Proposal #3 Reduce Commercial Rates A fairer system for local government charges should be considered. The new system should recognise the significant contribution being made by business. Reductions in income from the new property tax should not result in a rise in commercial rates. Any reductions in local charges or from local government reform should be first passed on to local businesses, because this money would be better spent supporting local job creation, particularly in the SME community. Building Competitive Advantage Assist indigenous businesses to grow Within 12 months Dependent on above Department of the Environment and Local Government. Indirect. Department of the Environment and Local Government.
Small Firms Association Proposal #4 Assistance through Research & Development Launch a tax credit lite model for SMEs. Despite good progress in recent years, many SMEs are not engaging with the R&D tax credit due to its complexity and administrative requirements. A tax credit lite model should be developed for SMEs which would include the use of pro forma templates for R&D project management, recording R&D activity and calculation of eligible costs and revenue benefit associated with the credit. Simple on line calculators demonstrating the benefit and eligibility rules of the credit would be a useful resource and would greatly improve awareness and promotion of the scheme. Assist Indigenous businesses to grow Building Competitive Advantage Within 6 months Dependent on above Department of Finance Indirect. Department of Finance Revenue Commissioners
Small Firms Association Proposal #5 Revise Proposed CGT Entrepreneur s Relief The announcement of this relief in Budget 2014 was welcome and we urge the Government to increase its efforts to get it through the formal EU approval process. However, we feel in practice the scheme will not work in its current format as the relief is given after the sale of a second successful business. In reality this means that it will take a decade before the entrepreneur will see any return and the likelihood of having two successful start-ups in a row is questionable in any event. This should be amended to match the UK scheme where you only pay 10% CGT if you sell or close all or part of a business. On condition you've held the share for at least a year and you are a director, partner or employee in the business, there is a lifetime limit on this of 10mn of gains so the tax saving can only be up to 1.8mn over a lifetime. Driving Entrepreneurship and Start-Up Companies Access to Finance for SMEs Within 12 months Dependent on above Department of Finance Indirect. Department of Finance
Small Firms Association Proposal #6 Reduction in Capital Gains Tax A reduction in Capital Gains Tax (CGT) to 20% from 33%. While some EU countries have high CGT rates, i.e. France 34.5% and Sweden 30%, they have certain incentive schemes with lower rates or exemptions in order to support entrepreneurial investment. These forms of relief are not currently available in Ireland. As a consequence CGT is no longer supportive of productive investments by domestic indigenous entrepreneurs and should be reformed. Assisting Indigenous Businesses to grow Building competitive advantage Within 12 months Dependent on above Department of Finance Indirect. Department of Finance
Small Firms Association Proposal #7 Employment and Investment Incentive Scheme Uptake of the Employment and Investment Incentive Scheme (EIIS) which replaced the BES scheme in 2011, has to date been disappointing. This is due to poor awareness and lack of promotion; an overly restrictive nature and a challenging investment climate. It has been committed that the scheme will be extended to 2020, however the scheme should be enhanced to improve its effectiveness. Firstly, the scheme should be rebranded to make its purpose clear, i.e. that it is investing in Irish SMEs. Secondly, a rebranded scheme would benefit from greater marketing and promotion to help smaller investors become aware of the opportunity. Detailed amendments to criteria for the scheme should be implemented as per our submission to the Department of Finance consultation. Access to Finance for SMEs Within 12 months Dependent on above Department of Finance Indirect. Department of Finance
Small Firms Association Proposal #8 Introduce a Finance Voucher Scheme It has been noted that there is a need to develop financial skills within small firms. The lack of financial management skills has been highlighted as a barrier to accessing bank finance and other forms of funding. While Enterprise Ireland and Skillnets ManagementWorks has developed some interventions, more needs to be done, as financial expertise is a vital skill for SMEs. In this regard, a Finance Voucher Scheme should be introduced (similar to the Innovation Voucher Scheme) which would be open to all SMEs to assist them in gaining specialist advice on preparing funding applications or for training staff in preparing cash flows etc. A small investment of 2,000 per company, could be provided to companies who apply. Access to Finance for SMEs Building Competitive Advantage Within 6 months Dependent on above DJEI and Enterprise Ireland Indirect. Enterprise Ireland
Small Firms Association Proposal #9 Greater access to public procurement for SMEs Government policy on the need to save money in public procurement, whilst valid, should be clearly aligned to its enterprise support and job creation agenda. Centralised aggregate contracts are making it more difficult for innovative SMEs to compete. There are challenges in small firms collaborating as they may fall fowl of competition law and do not have the required skills. Concerns regarding pre qualification and the information required are raised by SMEs as limited resources are available for the volume of information required. Action is required to remove these barriers; full appeals mechanism should be implemented which would include mandatory feedback on all tenders. An internal appeals process in each Department with the opportunity to appeal to an Ombudsman, if required, should be introduced. Within 12 months On Delivery. DPER, OGP and DJEI Job creation and retention provided. DPER, OGP and DJEI
Small Firms Association Proposal #10 Retention of 9% VAT & reintroduction of reduced PRSI rate for low wage workers The 9% VAT for hospitality and related sectors along with the lower employers PRSI rate for low wage workers have been successful. It was disappointing that the reduced PRSI rate lapsed at end 2013 with no announcement by Government. The Department of Finance (Nov 2012) produced a report which shows the effects that the lower VAT rate had provided, resulting in retention and creation of jobs. In the period since the change in the VAT and PRSI regimes the accommodation and food sector has added 4,700 jobs while other private sector industries employed 3,600 less. The lower VAT rate should be maintained and the low-wage PRSI rate should be reduced again as this will support real job creation. Sectoral Opportunities - hospitality, tourism and retail sectors. Budget 2015 Dependent on above Dept of Finance Job creation and retention. Department of Finance
Small Firms Association Proposal #11 Introduce IP related tax exemption / Patent Box A tax exemption on all profits and dividends created from Intellectual Property should be introduced for small companies. In addition, a Patent Box scheme at least equivalent to the UK model should be introduced for the multinational sector. This will be of benefit to both innovative Irish companies and will also be an incentive for multinationals to carry out R&D here and keep their IP here which will help to maintain and create new employment. Access to Finance for SMEs Within 12 months Dependent on above Department of Finance Indirect. Department of Finance Revenue Commissioners
Small Firms Association Proposal #12 Limit right of banks to ask for personal guarantees There is a need to stop banks insisting on personal guarantees for all borrowing. We have reports that banks are now seeking personal guarantees even for a business credit card facility. One member has reported that this is in addition to a requirement for a lien over double the amount of the proposed credit limit. Banks must be required to do at least some lending unsecured. Access to Finance for SMEs Within 6 months Dependent on above Department of Finance & Central Bank Indirect. Department of Finance & Central Bank
Small Firms Association Proposal #13 VAT on Electronic Services / MOSS Scheme From 1 January 2015, VAT on sales of electronic services, for example, ebooks, will be based not on the supplier s location but on the customer s location. Therefore, the supplier must charge VAT at the rate applicable in the country in which the customer resides and account for that VAT to the tax authorities in that country. Revenue is offering the MOSS scheme as a means for making one return of all such VAT. But nonetheless, the new regulations will mean that companies trading online will have to identify the country of location of each customer and charge different rates of VAT to them, record this and report it to the Revenue. This has the potential to kill any small business seeking to grow by making export sales from their website, and is directly contrary to Government policy on encouraging businesses to trade more on-line. We would ask the Government to set a de minimis level that would exempt businesses from this requirement below a reasonable threshold. Driving Entrepreneurship and Start-up Companies Within 6 months Dependent on above Department of Finance & Revenue Commissioners Indirect. Department of Finance & Revenue Commissioners
Small Firms Association Proposal #14 Shortage of Nurses forego Hospital Adaptations & allow Direct Entry Due to the severe shortage of nurses, Nursing Homes recruit their nurses mainly in India, but BSc nurses from outside the EU must do adaptations, i.e. 3 weeks medical and 3 weeks surgical in a hospital setting prior to commencing employment, even though their curriculum and hours of nursing are compatible with our system. DATHs (Dublin Academic Teaching Hospitals) are not conducting adaptations due to the fact that the new hospital (RCSI) in Bahrain has attracted a lot of their senior nursing staff and they have a shortage of Clinical Facilitators. Nursing homes cannot operate unless they have a full complement of registered nurses, so this is risking closure of existing units and delays in opening new homes, which results in a large number of potential ancillary jobs not being created. Due to a similar severe shortage in the UK, the Government there has decided to forego the hospital adaptations and allow direct entry. The Irish Government also allowed this in 2004/2005. We believe that this policy should be reintroduced for 2015 and extend if necessary to 2016. In addition, current proposals to change the Green Card System for nurses to the A-typical Green Card would be a complete disaster for the nursing home sector and should be abandoned. Driving Entrepreneurship & Start-Up Companies Immediate Immediate Department of Health; Department of Justice Significant with new nursing homes ready to come on stream. Department of Health; Department of Justice
Small Firms Association Proposal #15 Planning Permission Small Businesses in all sectors of the economy and in all regions continue to report difficulties and lengthy delays in the planning system. The system should be streamlined to ensure that job-creating projects are able to be commenced and complete in a timely fashion. Driving Entrepreneurship & Start-Up Companies 6 months 6 months Department of the Environment & Local Government; Local Authorities; An Bord Pleanala Significant with new businesses opening sooner Department of the Environment & Local Government
Small Firms Association Proposal #16 Grant Aid for Domestically Trading Businesses Re-evaluate the grant and state supports system to see whether feasible to offer financial supports and tax breaks to companies trading in the domestic sector, e.g. retail, holistic health, similar to exporters and foreign investors. Give additional incentives to rural start-ups on the grounds of regional balance. Driving Entrepreneurship & Start-Up Companies 6 months 6 months DJEI; Department of Finance Significant DJEI; Department of Finance
Small Firms Association Proposal #17 Good Broadband & Mobile Service for All Guarantee a reliable and adequate level and speed of broadband and mobile phone coverage, particularly in rural areas. Driving Entrepreneurship & Start-Up Companies 6 months 6 months Department of Communications, Energy & Natural Resources Significant Department of Communications, Energy & Natural Resources
Small Firms Association Proposal #18 Increase threshold for investment of private pension funds in business There is billions of Euros in private pension funds that are restricted from investment as follows: A private pension fund may invest a maximum of five percent of their fund value into a private unconnected company and may not hold more than ten percent of that company stock. Permission for the investment must be sought from Revenue. Failure to change the rules here means that some entrepreneurs are transferring their pension fund to the UK and moving their proposed start-up to Northern Ireland in order to make the investment through a UK Self-Investment Personal Pension (SIPP). UK revenue is more sensible and realise that if you invest in a small company you will have some control as a board member to protect your investment. One specific example is a company that was ultimately established in Warrenpoint, Co Down, and has now moved to Belfast, has twenty employees and is the shining star of Invest NI who to date has made additional grants of 400K sterling (not loans like the EI process). The unconnected rules of investment by Irish Revenue are preventing business from growing without additional encumbrance. The UK SIPP Model should be introduced in Ireland. Access to Finance for SMEs Driving Entrepreneurship & Start-Up Companies 6 months 6 months DJEI; Department of Finance Significant DJEI; Department of Finance
Small Firms Association Proposal #19 Change Apprenticeship Model More companies would take on more apprentices if the following changes were made to the scheme: 1) In year 3 and 4 the wages are too high for their output. Year 4: 90% of full wages in the present scheme - recommend 75% and 60% for year 3 (which was the figures some years ago). 2) Solas do not allow companies plan over the 4 years exactly when apprentices are being taken in for block release and companies have had situations where all their apprentices were in the same time or else they had to pay the extra wages to delay one or two of them. They also had apprentices being sent to the country for training, which is not satisfactory for them and sometimes they work for the company on a Saturday (for which they are paid overtime rates) but being away from home all week they tend not to want to work on the Saturday, which causes problems for the companies. 6 months 6 months Department of Education & Skills; Solas Significant n.b. youth employment Department of Education & Skills; Solas
Small Firms Association Proposal #20 Invest in training for Owner-Managers Review the Management Development Council Report (2010) and implement the recommendations on supporting owner-managers to upskill. This is estimated to reduce business failure by 50%. Building Competitive Advantage Assisting Indigenous Business to Grow 6 months 12 months Department of Education & Skills Significant Department of Education & Skills; Solas; Skillnets
Small Firms Association Proposal #21 Improve Ease of Casual Employment & Reduce Regulatory Burden of Employment Law Stop penalising people who are on unemployment for taking up casual work. Allow them to simply sign off for days they are working. Stop penalising small businesses trying to hire someone casually there is a plethora of unnecessary paperwork and responsibility if you want to hire someone casually. Basically if you remove restrictions and red tape and paperwork to facilitate businesses to hire people there will be organic growth in jobs. This is the best way to grow the economy - rather than creating problems and then pumping in money to artificially stimulate commerce, just remove obstacles and make it easier for businesses to grow organically. This also will lead to a reduction in black economy activity. At the moment, the legal responsibilities, the unfair judicial system, paperwork and regulations concerning hiring employees (or subcontracting for things) is a major deterrent to hiring someone. Supporting Employment at Community and Local Level 6 months 6 months Department of Social Protection; DJEI Significant Department of Social Protection; DJEI
Small Firms Association Proposal #22 Business Development Training Initiative Introduce a focused business development training initiative encompassing training, mentoring, exposure to role models and peer to peer learning. It would involve monthly workshops using targeted business development tools and followed up with mentoring. The workshops would combine an underpinning of theory but the majority of the workshop would focus on the application of key business tools, such as business model development, customer discovery and validation, value proposition determination, etc. Evidence here from an EU funded initiative that forms the basis for this proposal: http://tools.cimeproject.com/ A minimum of 12 months Short and medium term DJEI - Financial resources to cover the design, development and delivery of the programme. Strong potential: evidence here from an EU funded initiative that forms the basis for the one proposed: http://tools.cimeproject.com/ (full evaluation report on the website). Enterprise Ireland.
Small Firms Association Proposal #23 Retail Sector Cost Competitiveness Ensure that government in all its various guises stops imposing extra costs on the retail sector, increasing its overheads and damaging its competitiveness with poor licencing and regulation. Rather than measures to help, it s about stopping hindering the sector. Building Competitive Advantage Supporting Employment at Community and Local Level Sectoral Opportunities Immediate Immediate Stop the practice of passing on extra costs to the retail sector, for example: National Weights & Measures now have to pay a private company 456 per scale per annum to have it stamped. Environmental Health Officer inspections 4 per annum proposal to charge for inspections from 2015 Added restaurant onto shop, employing 22 people planning blocked, heritage grant revoked because couldn t agree to single glazing windows, rates doubled. Get nothing for rates now as refuse and water are charged separately. Below cost selling is an issue in off-licences competing with supermarkets. Excise increases on wine have seriously damaged business in last number of years. Minimum of 17 Licences from different agencies required before opening the doors. Reduced bureaucracy and costs enables job creation Dept of Jobs, Enterprise & Innovation; Department of the Environment & Local Government; Department of Finance
Small Firms Association Proposal #24 Tackling the black market Stronger legislation and enforcement mechanisms with harsher penalties to act as a disincentive to those conducting illicit trade Public awareness campaigns to educate Irish consumers that buying illicit goods is not a victimless crime and results in lower tax revenues for the government and job losses for Irish businesses Ireland must strengthen its engagement with other countries, particularly at EU level, to develop a unified legislative approach in tackling the issue If individuals are convicted for illegal activity i.e. tax/custom/excise evasion and they are in receipt of social protection benefits, these benefits should be reduced by the losses the State has incurred until the amount owed is reimbursed to the State. 1. Improving Competitiveness 6. Stimulating Demand in the Domestic Economy 3. Assisting Indigenous Business to Grow 12 18 months Dependant on the above Interdepartmental co-operation to involve resource from Dept. of Justice, Dept. of Social Protection and DJEI. Creation of a more robust formal economy, creating real jobs as opposed to those in the black economy where greater regulation and protection exists. Dept. of Justice Dept. of Jobs, Enterprise and Innovation Dept. of Social Protection