While welcoming the increase in R&D tax, as well as continued funding for innovation, the decision to reduce technology spending in Irish classrooms could prove damaging to the future skills of Irish workers, the ICT industry railed last night.
ICT Ireland, which represents the ICT industry responsible for employing 85,000 people in the Irish economy, said that the increase in the R&D tax credit from 20pc to 25pc was welcome.
However, it raised concerns about the changes in tax payment dates for corporation tax rates for large companies.
But its biggest fears centred on the lack of extra investment in teaching and support of science and maths in Irish schools.
“The increase in education spend did not include special measures to support the teaching of science and maths, which has been recommended by the state body Forfas in a recent report on the need for skills in the high-tech sector,” said Kathryn Raleigh, director, ICT Ireland.
“A reduction in the Government’s commitment to roll out the use of ICT in the classroom by reducing the current and capital spend on schools’ ICT activities by almost 30pc is particularly damaging to the future skills of our young students.
“If we invest now in the teaching of science and maths, and in the use of ICT in schools education, we can be sure that our young people are well equipped with the skills needed to succeed in a global, mobile and knowledge-led economy,” Raleigh said.
“The technology sector would welcome an opportunity to engage with the Department of Education and Science in a collaborative manne,r and to share best practice models which have been implemented by their companies across the globe,” Raleigh added.
Martin Murphy, managing director of HP Ireland, which employs around 4,000 people in the Republic of Ireland, welcomed some of the tough budgetary decisions, as well as continued support for R&D and innovation, but felt that inefficiencies in the public sector still need to be addressed.
“A robust five-year National Recovery Plan must follow on from today’s Budget, which must be focused towards retaining and attracting multinationals and the expertise they bring with them,” Murphy explained.
“Multinationals have been the force of economic growth in this country, both through employment and exports. Attracting a new generation of companies to this island now requires more innovative tax measures, plus a very strong impetus towards marketing Ireland Inc overseas in emerging geographies such as India, South East Asia and the Middle East.”
He said there is a need for a renewed and sustained focus on multinationals. “Huge opportunities for Ireland will emerge from the current global turmoil. Now more than ever we need the leadership, decisive action, investment and spending in certain areas to ensure that we seize these opportunities and use them as the basis for retaining existing and attracting new companies to Ireland.
“We have to focus on the new generation of companies in previously untapped geographies, we have to offer even greater incentives to undertake R&D in this country, so that Ireland has the skills and more importantly the know-how to get back into the game.”
Murphy explained that attracting multinationals to Ireland brings with it new generations of leaders and decision-makers who create clusters of innovation and entrepreneurship.
“These companies can bring research and development to commercialisation in a short time, which has a hugely positive impact for all businesses located here.” He also said that removing working permit and visa restrictions for the highly skilled would increase the attractiveness of Ireland as an investment location.
The Irish Software Association (ISA) broadly welcomed the focus on technology and innovation in yesterday’s budget. However, director Shane Dempsey has warned the Governments missed a significant opportunity to drive growth in Ireland’s SME sector by not increasing the limits companies can raise through BES (Business Expansions Scheme).
“Measures such as the new ventures waiver for corporation tax and capital gains tax and overdue improvements in the Research and Development tax credit scheme are steps in the right direction. However, software firms and other SMEs who can achieve real growth are having extreme difficulty accessing sufficient funding. Allowing companies to raise more investment for growth through the Business Expansion Scheme is essential.”
“Software SMEs in particular can create product and services that enable growth in other sectors. An excellent example can be seen in the telecom sector where Irish software companies such as Changing Worlds and Altobridge are global leaders. Allowing more companies of this type to raise greater levels of funding will yield great returns to the exchequer and create more valuable IP and increase employment,” Dempsey said.
“Finally, this budget marks another year passed where the use of technology in schools was ignored. Each year, our education system produces another cohort of talented and bright Leaving Cert students; a large percentage will be lacking sufficient IT skills to operate in the modern working environment,” Dempsey warned.
Business group Chambers Ireland welcomed increases in local authority funding and the reduction of commercial stamp duty, but warned the Budget lacked crucial detail in many areas such as capital investment plans and education.
It described the decision to increase the standard rate of VAT to 21.5pc as “disappointing”. “This will lead to increased inflation and further reduction in consumer confidence. VAT has a disproportionate impact on lower income groups, who are also disadvantaged by the new flat rate levy on all incomes regardless of circumstances.”
Chambers Ireland welcomed the reduction in commercial stamp duty from 9pc to 6pc. However, it said this rate remains high by internationally competitive standards, despite the Minister’s assertion that this rate will not be reviewed again during the tenure of this Government.
“The continued reaffirmation of the 12.5pc corporation tax rate is critical to the future retention of foreign direct investment opportunities, and the expansion of the R&D tax credit may increase opportunities in this area.
In terms of public service spending, Chambers Ireland has commended the reduction of 41 state agencies, but believe that there is significant scope for further cuts in this area.
“The 10pc reduction in salaries by Ministers and senior civil servants is timely, but adds little benefit in light of the overall level of public sector salary growth, which has increased by 12pc annually since 2000.”
However, the organisation railed against the introduction of air travel tax. “As an island economy, air travel is essential to doing business. Continuing to penalise this sector with increased travel taxes is detrimental to our competiveness,” Chambers Ireland warned.
By John Kennedy