SMALL FIRMS ASSOCIATION SUBMISSION ON THE ACTION PLAN FOR JOBS 2016

SMALL FIRMS ASSOCIATION SMALL FIRMS ASSOCIATION SUBMISSION ON THE ACTION PLAN FOR JOBS 2016 Presented to: Department of Jobs, Enterprise and Innovation September 2015 1

INTRODUCTION The Small Firms Association (SFA) is the trusted partner of small businesses in Ireland, with 8,500 members and six affiliated organisations in all sectors and parts of the country. Its mission is to deliver business-focused advice and insights to member companies, influence government policy to the benefit of small businesses and connect its members in a thriving community. The SFA welcomes the opportunity to outline proposals and ideas that will assist our members in job retention and creation within their business. Further to the meeting between the SFA and Minister Bruton in July, we now provide more details of our proposals (28 in total). As requested, these outlines contain the relevant themes; the timeline for delivery; the timeline for impact; the decisions or to realise them; the likely potential impact on, and who should be responsible for implementing the actions. This submission should be read in conjunction with the SFA Pre-Budget 2016 Submission. Any items included therein that are not implemented in Budget 2016 should be included in the Action Plan for Jobs 2016 for economic assessment with a view to their implementation in Budget 2017. As a general principle, we believe that every policy emanating from government should be 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 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 2016. Please contact Patricia Callan, SFA Director, by phone on 01 6051602 / 087 6999345 or by email at patricia.callan@sfa.ie 2

OVERVIEW OF SFA PROPOSALS Priority actions 1. Revise Capital Gains Tax Entrepreneurial Relief 2. Reduce Capital Gains Tax rate to 20% 3. Introduce voluntary PRSI for the self-employed 4. Introduce a childcare tax credit 5. Improve access to public procurement for small firms 6. Invest in training for owner-managers 7. Revise the tax rules on employee share options 8. Reduce the bankruptcy period to one year and create structures to encourage second chance entrepreneurship 9. Ensure all areas have access to broadband and good mobile service : Assisting indigenous businesses to grow 10. Improve the Employment and Investment Incentive Scheme 11. Improve ease of casual and part time employment for jobseekers 12. Assist small firms to engage in more R&D by introducing an R&D Tax Credit Lite 13. Improve access of indigenous SMEs to research funding 14. Grant aid for domestically trading businesses 15. Amend the Transfer of Undertaking Regulations to encourage recruitment : Driving entrepreneurship and start-up companies 16. Phase in employer PRSI for new companies : Delivering the potential of all regions 17. Freeze the National Minimum Wage for three years 18. Promote Ireland as a sports tourism destination : Improving access to finance for SMEs 19. Limit right of banks to ask for personal guarantees 20. Develop a channel to access SBCI funding separate to the pillar banks 21. Extend Small Claims Remit for B2B Debts 22. Introduce a Finance Voucher Scheme 23. Increase threshold for investment of private pension funds in business : Realising sectoral opportunities 24. Retain reduced 9% VAT rate in hospitality and related sectors 25. Revise the Fair Deal scheme to address demographic challenges and create jobs in the nursing home sector 26. Clamp down on the black market : Developing and enhancing the skills base 27. Change apprenticeship model : Developing and deepening the impact of foreign direct investment 28. Make Ireland attractive for angel investors and venture capital. Enhance learning and procurement opportunities with MNCs for indigenous business. 3

PRIORITY ACTIONS Small Firms Association proposal #1 Revise Capital Gains Tax Entrepreneurial Relief The announcement of the CGT Entrepreneurial Relief in Budget 2014 was welcome; however, the SFA remains convinced that the scheme is overly restrictive and will not work in its current format. The fact that the relief is given after the sale of a second successful business means in reality that it will take a decade before the entrepreneur will see any return and, in any event, the likelihood of having two successful start-ups in a row is questionable. The SFA proposes that this relief is amended to mirror the UK scheme, where CGT of 10% is due on the sale or closure of all or part of a business, on the condition that the entrepreneur has held the share for at least a year and is a director, partner or employee in the business. There is a lifetime limit of Stg 10mn of gains so the lifetime tax saving is limited to Stg 1.8mn. Driving entrepreneurship and start-up companies Improving access to finance for SMEs Assisting indigenous businesses to grow Within 12 months Medium term Department of Finance to review current Entrepreneurial Relief Assessment of UK scheme to be carried out in view of suitability for introduction in Ireland Indirect by increasing the flow of investment in Ireland Department of Finance 4

Small Firms Association proposal #2 Reduce Capital Gains Tax rate to 20% Ireland has one of the highest rates of CGT amongst developed economies at 33% (except for some legacy reliefs relating to property). This puts Ireland at a competitive disadvantage when it comes to attracting and retaining mobile investment. For comparison, in the UK the rate is either 18% or 28% depending on the size of income and capital gains. While some EU countries have high CGT rates, e.g. 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. Reduce CGT to 20% across the board, to make investing in a business in Ireland more attractive, in particular relative to competitor countries. Assisting indigenous businesses to grow Within 12 months Medium term Decision required by Department of Finance and at political level Indirect by increasing the flow of investment in Ireland Department of Finance 5

Small Firms Association proposal #3 Introduce voluntary PRSI for the self-employed A voluntary PRSI contribution should be introduced, to allow entrepreneurs and the self-employed qualify for social welfare benefits similar to their employees. This would enable them to claim unemployment benefit should their business fail. The rate should be lower for start-ups in the first two years. It should operate on an opt-in basis for established businesses and cannot be viewed as an opportunity to impose additional taxes on small business. Driving entrepreneurship and start-up companies Within 6 months Short to medium term Cost-Benefit Analysis to be undertaken Decision by Department of Social Protection to amend scheme to allow variation of PRSI Class A to allow selfemployed to make a combined contribution for themselves both as an employer and employee or use international models, e.g. France. The 2013 GEM Report shows that fear of failure among the Irish entrepreneurial adult population has risen from 35% in 2006 to 45% in 2013. Fear of failure in Ireland deters individuals from starting a new business. This change would represent a step towards the development of a more attractive environment for entrepreneurs. Department of Social Protection Revenue 6

Small Firms Association proposal #4 Introduce a childcare tax credit The prohibitive cost of childcare is forcing many skilled people to leave the workplace. Net childcare costs in Ireland are the highest in Europe at 35% of family income, which is three times the OECD average. It is critical that Government increases its supports for working parents through introducing a tax credit for childcare costs. Developing and enhancing the skills base Assisting indigenous businesses to grow 6 months Immediate Decision required by the Department of Finance Positive impact on participation rates, especially among females Department of Finance Department of Children and Youth Affairs Revenue 7

Small Firms Association proposal #5 Improve access to public procurement for small firms 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 do not have the required skills or they may fall fowl of competition law. 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. A 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. Assisting indigenous businesses to grow Delivering the potential of all regions Within 12 months Immediate Differentiate between micro, small and medium firms when gathering data to allow a clear picture of the procurement environment to emerge Set small and micro-firm targets for government procurement Remove the price priority in favour of a more holistic assessment of economic value Change the provisions around sub-dividing a contract into lots as currently set out in Circular 10/14 Job creation and retention in small firms around the country due to increased business and certainty over the period of the contract Department of Public Expenditure and Reform Office of Government Procurement Department of Jobs, Enterprise and Innovation 8

Small Firms Association proposal #6 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%. Ensure maximum awareness of all available programmes. Developing and enhancing the skills base Assisting Indigenous Business to Grow 6 months 12 months Financial resources to cover the design, development and delivery of the programme Significant Department of Education and Skills Solas Skillnets Enterprise Ireland 9

Small Firms Association proposal #7 Revise the tax rules on employee share options The current situation in relation to the taxation of employee share options is inequitable and damages the ability of start-ups to attract talent. Employees who join young start-ups on these terms are every bit as much an entrepreneur as the company founders. Start-ups cannot pay salaries or offer benefits that compare to large established multinationals, so they must compete to attract talented employees by way of share options with potentially great future value. In short, there is currently no good way to reward early employees for the risks they are taking, and the vital contribution they are making to entrepreneurial activity in the Irish economy. Therefore, a mechanism should be available so that employees of start-up companies can be taxed on share options at CGT rates at the time when the purchased shares are disposed of. Driving entrepreneurship and start-up companies Developing and deepening the impact of foreign direct investment 12 months Immediate Decision required by Department of Finance Enhance the ability of start-up companies to attract talent, both from within Ireland and from abroad Department of Finance Revenue Commissioners 10

Small Firms Association proposal #8 Reduce the bankruptcy period to one year and create structures to encourage second chance entrepreneurship Creating a culture of entrepreneurship and risk taking is essential to driving economic growth and. Central to this is an acceptance of failure and the existence of an environment conducive to starting again. In Ireland, however, the social stigma of failure stifles second chance entrepreneurship and the bankruptcy regime remains overly-punitive. The SFA supports the reduction of the period of bankruptcy to one year, a change which is also advocated by the Joint Oireachtas Committee on Justice, Defence and Equality. The SFA strongly believes that Government policies should support businesses at risk of failure and encourage entrepreneurs back into business as quickly as possible after bankruptcy. Advice and mentoring should be available to companies in difficulty, both through their banks and from successful entrepreneurs. Driving entrepreneurship and start-up companies 12 months Medium term Conduct a review of the early-warning and second chance programmes that exist in other European countries, for example Denmark and the UK Decision on the bankruptcy period for honest business failures required by the Department of Justice Medium term impact on the culture of entrepreneurship, which will drive Department of Justice Department of Jobs, Enterprise and Innovation 11

Small Firms Association proposal #9 Ensure all areas have access to broadband and good mobile service Guarantee an adequate and reliable level and speed of broadband and mobile phone coverage, particularly in rural areas. When broadband is available in all regions, no area should be at a disadvantage. Assisting indigenous businesses to grow Driving entrepreneurship and start-up companies Delivering the potential of all regions 6 months 6 months Faster rollout of the National Broadband Plan Significant. Towns that have received fibre broadband on a pilot basis have seen a high proportion of people considering setting up businesses. Department of Communications, Energy and Natural Resources 12

THEME: ASSISTING INDIGENOUS BUSINESSES TO GROW Small Firms Association proposal #10 Improve the Employment and Investment Incentive Scheme Uptake of the Employment and Investment Incentive Scheme (EIIS) has to date been disappointing. This is due to poor awareness and lack of promotion; an overly restrictive nature and a challenging investment climate. Firstly, the scheme should be rebranded to make its purpose clear, i.e. that it is investing in Irish SMEs. Returning to BES as the name of the scheme would be beneficial. Secondly, a rebranded scheme would benefit from greater marketing and promotion to help smaller investors become aware of the opportunity. In particular, promote the family and friends and private placement options, as well as funds option, and make it easy for companies to use the scheme without having to pay for expensive professional advice. Detailed amendments to criteria for the scheme should be implemented: Return to a five-year investment term so that the businesses have the necessary time to grow sufficiently to be capable of repaying the investors. Remove employment and R&D criteria these complicate the scheme unnecessarily. By definition if the business grows these will occur, but it poses unnecessary risk to the investor up front. Evaluate the cost-benefits of extending the scheme to other specific sectors. Exempt the gain from CGT if it is held for seven years (similar to property reliefs already in place). Examine UK and international models with a view to implementing Government risk-sharing models with private investors in similar schemes. This would be important to attract non-traditional BES/EIIS type investors, and specifically other small business owners who might be interested in investing in other businesses. Assisting indigenous businesses to grow Access to finance for SMEs Within 12 months Immediate 13

Decision to be taken by Department of Finance Resources must be allocated to promoting the scheme Greater capitalisation of small businesses will allow them to grow and create jobs Department of Finance 14

Small Firms Association proposal #11 Improve ease of casual and part time employment for jobseekers We call on Government to remove social welfare traps and introduce improved structures to incentivise social welfare recipients to take up work, including casual and part time work. Part time work has been shown to be a stepping stone to full time employment across Europe. However, the Irish social welfare system disincentivises jobseekers from taking up part time work. To encourage jobseekers to take up part time work, social welfare should be calculated on an hourly basis or aggregated over the course of a week. This would allow casual and part time workers to sign off only for those periods when they are working and not be penalised. Furthermore, it should be made easier for a small business to hire casual staff. Currently there is a plethora of unnecessary paperwork and responsibility if an employer wants to hire someone casually. This would remove obstacles and make it easier for businesses to grow organically. At the moment, the legal responsibilities, the unfair judicial system, paperwork and regulations concerning hiring employees (or subcontracting) is a major deterrent to recruiting. Assisting indigenous businesses to grow Delivering the potential of all of the regions 12 months Immediate Changes needed under both the Department of Social Protection and the Department of Jobs, Enterprise and Innovation Significant in the current context of 9.5% unemployment Department of Social Protection Department of Jobs, Enterprise and Innovation 15

Small Firms Association proposal #12 Assist small firms to engage in more R&D by introducing an R&D Tax Credit Lite Despite good progress in recent years, many SMEs are not engaging with the R&D tax credit due to its complexity and administrative requirements. It is necessary to create a specific, tailored R&D tax credit scheme for small firms to encourage more R&D spend R&D Tax Credit Lite. Such a scheme should reduce the existing complexity by using proforma templates for R&D project management, recording of R&D activity and calculations of costs and revenue benefit. Simple on-line calculators should be developed to increase usability for small firms and targeted promotion of the scheme should be rolled out. In many cases, owner-managers who engage in R&D do not qualify for tax credits following tax assessments by external Revenueappointed experts. We need certainty about what will and will not qualify for tax credit purposes, particularly in micro-enterprises, where owner-managers are likely to be engaging in R&D themselves, as this will greatly incentivise such companies who are wary of expenditure on R&D in the absence of the tax credit. Assist indigenous businesses to grow Within 6 months Immediate New scheme to be developed by Department of Finance Resources required to publicise the scheme Indirect Department of Finance Revenue Commissioners 16

Small Firms Association proposal #13 Improve access of indigenous SMEs to research funding A major gap in supports exists around the activities of the state research funding agencies, and in particular, Science Foundation Ireland. SFI's funding schemes are very much geared towards large, primarily foreign, multinational companies. It is difficult for small firms to leverage the same level of interest or support. Specific schemes designed to meet the needs and resources of indigenous small firms would have the potential to unleash a major increase in IP generation capability and open up international markets for many companies, leading to significant potential job creation. Assisting indigenous businesses grow Improving access to finance for SMEs 12 months Short to medium term Decision required on whether to make additional funding available or redirect existing funding Sustainable in research intensive industries State agencies Department of Jobs, Enterprise and Innovation 17

Small Firms Association proposal #14 Grant aid for domestically trading businesses Re-evaluate the grant and state supports system to see whether it s 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. Assisting Indigenous Businesses to Grow Driving Entrepreneurship & Start-Up Companies Delivering the potential of all regions 6 months 6 months Decisions required by Department of Finance Scheme to be designed by the Department of Jobs, Enterprise and Innovation and Enterprise Ireland Significant DJEI; Department of Finance 18

Small Firms Association proposal #15 Amend the Transfer of Undertakings Regulations to encourage recruitment The current Transfer of Undertakings rules penalises companies from taking on staff due to the legal costs of cases taken by other employees. We have examples of our member companies being taken to the Labour Court, Employment Appeals Tribunals and Rights Commissioners by people who have already received redundancy payments from the liquidator. This poses major obstacles for companies when outsourcing opportunities arise and discourage them from taking on business. Assisting indigenous businesses to grow 12 months Short term Amend the regulations to ensure the maximum number of jobs is able to be retained in a transfer scenario and that it makes sense for the new business to keep people on. Removal of a barrier to doing business Department of Jobs, Enterprise and Innovation 19

THEME: DRIVING ENTREPRENEURSHIP AND START-UP COMPANIES Small Firms Association proposal #16 Phase in employer PRSI for new companies Phase in employer s PRSI, so that new businesses pay reduced rates of employer PRSI on staff they recruit in their first three years. This will encourage them to hire earlier. For example: 25% for staff recruited in year 1 50% for staff recruited in year 2 75% for staff recruited in year 3 and The full rate on later recruitment Driving entrepreneurship and start-up companies Delivering the potential of all regions 6 months Immediate Decision required by Department of Finance Incentivisation of early hiring Department of Finance 20

THEME: DELIVERING THE POTENTIAL OF ALL REGIONS Small Firms Association proposal #17 Freeze the National Minimum Wage for three years The recovery is still fragile for many small businesses and there are clear urban/rural divides in how well businesses are doing. A higher minimum wage will have a disproportionate impact on small businesses outside Dublin, where the NMW represents a higher proportion of the average wage. Given the urban/rural imbalance already being experienced in the recovery, this is of particular importance. Looking at the profitability of small businesses, it is clear that they will have grave difficulty absorbing labour cost increases without productivity gain. From an examination of the 2012 average gross (pre-tax) profits in small businesses in the sectors with the majority of National Minimum Wage (NMW) workers, it is clear that they would not be able to offset NMW increases against profits, as in micro firms (1-10 employees) which are 84% of all businesses in Ireland, average pre-tax profits in Accommodation and Food businesses were 14,549; in Retail were 21,470 and Other Services were 16,582. This means that they will have no choice but to offset NMW increases against reductions in hours or jobs, job growth or capital or skills investment. Freezing the NMW rate for a three-year period would give small businesses, which are just starting on the recovery path, certainty over their labour costs. This would also ensure that efforts are realisable for the low-skilled workers and young people still on the live register who need an entry point into work and upskilling from where they can develop their skills and increase their wages relative to their productivity levels. Delivering the potential of all regions Assisting indigenous businesses to grow Budget 2016 Immediate Political-level decision required Job creation and retention in small firms around the country Cabinet 21

Small Firms Association proposal #18 Promote Ireland as a sports tourism destination Concentrating on and investing in the promotion of Ireland for sports tourism is a very worthwhile target. Other European countries can provide models of successful implementation. The small size of Ireland geographically and the improved road infrastructure in recent years means that there is no need for large events to be Dublin-based. Government resources should be used to put these events on the map/calendar decisively. Delivering the potential of all regions Assisting indigenous businesses to grow Realising sectoral opportunities 12-24 months Immediate Coordination required between the Department of Transport, Tourism and Sport, Local Authorities and the national sports bodies Direct employment in the sporting events in question and indirect employment through the impact of increased tourist numbers on the wider economy Department of Transport, Tourism and Sport Local Authorities National sports bodies 22

THEME: IMPROVING ACCESS TO FINANCE FOR SMES Small Firms Association proposal #19 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 Short to medium term Department of Finance and Central Bank to provide guidance and targets, in particular to the pillar banks Indirect Department of Finance Central Bank 23

Small Firms Association proposal #20 Develop a channel to access SBCI funding separate to the pillar banks SFA members have reported mixed experiences with access to SBCI funding through the main banks. Many feel that the banks are dismissive about SBCI funding even where it is appropriate or when the customer specifically seeks it. A channel to access SBCI funding separate to the established banks is needed. This would allow risks to be taken with the smaller businesses as the fund was intended for. Otherwise the barriers to capital intensive businesses will remain. Improving access to finance for SMEs Driving entrepreneurship and start-up companies Assisting indigenous businesses to grow 12 months Impact will begin to be felt immediately, and will increase over the short term Alternative channel to be developed by SBCI Significant Department of Finance SBCI 24

Small Firms Association proposal #21 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 Assisting Indigenous Businesses to Grow Within 12 months Medium term 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 and Law Reform 25

Small Firms Association proposal #22 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 Assisting Indigenous Businesses to Grow Within 6 months Dependent on above Design of scheme by the Department of Jobs, Enterprise and Innovation and Enterprise Ireland Indirect Department of Jobs, Enterprise and Innovation Enterprise Ireland 26

Small Firms Association proposal #23 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 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). The UK system acknowledges that those who invest in a small company have some control as a board member to protect their investment. The unconnected rules of investment by Irish Revenue are preventing business from growing. A system based on the UK SIPP model should be introduced in Ireland. Access to finance for SMEs Driving entrepreneurship and start-up companies 6 months 6 months Decision required by the Department of Finance Significant Department of Jobs, Enterprise and Innovation Department of Finance 27

THEME: REALISING SECTORAL OPPORTUNITIES Small Firms Association proposal #24 Retain 9% VAT for hospitality and related sectors The Department of Finance (November 2012) produced a report which shows the effects that the lower VAT rate had provided, resulting in retention and creation of jobs. The lower VAT rate should be maintained as this will support real job creation. Realising sectoral opportunities Budget 2016 Immediate Decision required by the Department of Finance and at political level Job creation and retention in small firms around the country Department of Finance 28

Small Firms Association proposal #25 Revise the Fair Deal scheme to address demographic challenges and create jobs in the nursing home sector An immediate stimulus programme and a strategy to enable the nursing homes sector to expand and develop new facilities to meet the considerable growth in requirement for long-term residential care are urgently needed. An enhanced framework should recognise and support the increasingly complex care requirements of nursing home residents. The Oireachtas Joint Committee on Health and Children has recommended in this respect. Its Report on End of Life and Palliative Care, published July 2015, recommends: In reviewing the Fair Deal scheme an evidence-based cost of care model could be used in assessing the real cost of residential nursing home care in Ireland. This would provide the certainty and confidence amongst providers to create thousands of jobs in urban and rural communities to meet the requirement. A minimum of 7,600 long-term residential care beds will be required to year 2021 to meet our ageing population s health and social care requirements. The private and voluntary nursing home sector has the expertise and commitment to the provision of the required beds and this will create 10,000 direct sustainable jobs over the next decade to meet requirement for long-term residential care. This can only be achieved on the basis of recognition of the costs of such provision and meaningful engagement with the sector on strategic planning to address the residential care requirements of our ageing demographic. Realising sectoral opportunities Assisting indigenous businesses to grow 12 months Starting immediately and continuing for the short- and medium-term Revision of Fair Deal scheme required Additional state funding to be made available alongside private contributions 10,000 over the next ten years Department of Finance Department of Health 29

Small Firms Association proposal #26 Clamp down on the black market The Irish economy would benefit from stronger legislation and enforcement mechanisms with harsher penalties to act as a disincentive to those conducting illicit trade. Investment is needed in public awareness campaigns to educate Irish consumers that buying from the black market is not a victimless crime and results in lower tax revenues for the government, job losses and business closures. A campaign similar to the one conducted to highlight fraudulent insurance claims would be effective. 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. Assisting indigenous business to grow 12-18 months Medium term Interdepartmental co-operation to involve resource from the Department of Justice, Department of Social Protection and Department of Jobs, Enterprise and Innovation. Creation of a more robust formal economy, creating real, sustainable jobs which are subject to greater regulation and protection Department of Justice Department of Jobs, Enterprise and Innovation Department of Social Protection 30

THEME: DEVELOPING AND ENHANCING THE SKILLS BASE Small Firms Association proposal #27 Change apprenticeship model More companies would take on apprentices if a number of challenges were addressed: 1) In year 3 and 4 the wages are too high. Under the present scheme, the wages in year 4 are 90% of full wages. 75% in year 4 and and 60% for year 3 would be more appropriate. 2) Companies should also be facilitated in planning when apprentices are taken in. Currently Solas does not allow companies to control this and it leads to timelines that are not optimal for the companies. 3) The age restriction should be removed. Developing and enhancing the skills base Assisting Indigenous Businesses to Grow 6 months Immediate Decisions required by the Department of Education and Skills and Solas Significant, in particular for youth employment Department of Education and Skills Solas 31

THEME: DEVELOPING AND DEEPENING THE IMPACT OF FOREIGN DIRECT INVESTMENT Small Firms Association proposal #28 Make Ireland attractive for angel investors and venture capital. Enhance learning and procurement opportunities with MNCs for indigenous business. Ireland has a very short supply of experienced angel investors and venture capital when compared to the UK or the US. The lack of depth and experience in the Irish investor pool puts Irish businesses at a disadvantage, because convincing investors to invest outside of their home market is challenging. This occurs both for reasons of unfamiliarity, legal and currency risk, and due to specific homemarket tax advantages such as the UK EIS scheme. Although this is probably the biggest issue for Irish start-ups, it is not as easily addressed via a simple tax change. Ultimately the best way to fix this issue is through organic growth in the number of angel investors (who are typically former entrepreneurs who have sold their businesses); however it may be possible to attract some international VCs through targeted tax changes. MNCs based in Ireland should also encourage their employees to be innovative and be supportive of spin-outs by employees from their companies, which they then might invest in. MNCs should also increase their procurement spend with indigenous businesses from 14bn currently (of 80bn in total purchases), through better linkages via the state agencies such as EI and IDA. Developing and deepening the impact of foreign direct investment Driving entrepreneurship and enhancing the skills base Assisting indigenous businesses to grow Medium term Medium term Changes in the tax code Targeted trade missions Developing national offering for angel investors and venture capitalists Significant impact on number of companies starting up 32

IDA and EI Department of Finance Department of Jobs, Enterprise and Innovation 33