Budget 2022 serves up supports for the disrupters and the disrupted

2 days ago

Tánaiste Leo Varadkar, TD, at a Budget 2022 press conference. Image: Julien Behal Photography

From disruptive technologies to digital transformation to regional enterprise development, Budget 2022 will see support spread across Irish businesses of all tech capacities.

This week, Paschal Donohoe, TD, and Michael McGrath, TD, laid out a Budget package giving us the broad strokes on what the Finance Bill will bring into sharper relief later this month.

What we do know now, though, is that this is a welcome and temperate Budget for the STEM and start-up communities in Ireland, with no real shocks to these systems or major windfalls to report.

New opportunities for early-stage start-ups

“For businesses looking to the future, this Budget backs you,” Donohoe declared, after he announced measures including up to €90m to be invested in Irish start-ups through an extension of the Innovation Equity Fund.

The start-up community welcomed this news along with the extension of the Employment Investment Incentive scheme for another three years, coupled with vague enough promises to make it more attractive to a broader scope investors.

Changes to the scheme have long been advocated by Scale Ireland, an independent group representing start-ups and scale-ups. “We welcome the measures introduced to incentivise private investment in early-stage start-ups, which are struggling to attract funding, despite the overall positive funding environment,” said Scale Ireland chair Brian Caulfield (whose own annual Budget summary is always worth a read).

“We also hope the €90m Innovation Equity Fund will be operating as promised in early 2022, as many early-stage start-ups cannot scale without sufficient investment, and this follows a four-year decline in early-stage funding,” he added.

Scale Ireland CEO Martina Fitzgerald also welcomed the news from Budget 2022 but reminded the Government of its missing commitments from 2019.

“In terms of the upcoming Finance Bill, we hope the Government will be able to implement many of the changes in the 2019 Finance Bill – for small and micro companies – which are still outstanding. These include increasing the R&D tax credit from 25pc to 30pc, which would have a significant impact.”

Good news for gaming

Other measures welcomed by the sci-tech start-up community included corporation tax relief for new companies, reliefs for remote workers, and a digital gaming tax credit at a rate of 32pc on eligible expenditure up to a maximum of €25m per project

Ian Collins, head of innovation incentives at EY Ireland, said of this last measure, “This compares very favourably to many of our competitor jurisdictions where a [digital gaming tax credit] has been in place for many years. It is hoped this will have the intended consequence of boosting Ireland’s creative economy, and act as a further stepping stone to promoting Ireland as a world-class hub for the digital gaming sector.”

Deloitte tax partner Caroline O’Driscoll echoed this sentiment, commenting that the tax credit for the gaming sector is likely to do for this industry what has been done for pharma, manufacturing and the well-established Irish film and animation sectors through tax reliefs.

“The global gaming industry is estimated to be worth over €100bn, with the Minister acknowledging that employment in this sector in Ireland has not matched global trends,” said O’Driscoll.

“We know from past experience with the research and development tax credit and indeed film tax relief how valuable such targeted measures can be. The R&D incentives in Ireland are, in part, credited with assisting in developing a strong presence in manufacturing and pharmaceuticals, while the film tax relief has helped in growing employment significantly since its introduction. Building on that success, the introduction of a tax credit to encourage growth in digital gaming is a welcome development for the media industry in Ireland.”

Funding for the disrupters and the disrupted

In his speech, McGrath announced that a new funding call for the Disruptive Technology Innovation Fund (DTIF) will support projects spanning “environmental sustainability, AI, life sciences, and medical devices”.

This €500m fund, which is managed by Government with administrative support from Enterprise Ireland, will see an additional €35m added to allow a further call for applicants in 2022.

Budget 2022 also includes the €10m Digital Transition Fund and €10m Climate Transition Fund previously announced in the revised National Development Plan.

“These are all designed to kick-start new areas of economic growth, providing long-term, future-proofed jobs,” said Tánaiste Leo Varadkar, TD, of the three funds.

McGrath asserted that the Digital Transition Fund will encourage the development and adoption of data analytics and AI across Irish businesses, particularly SMEs. We can also expect a new round of the Online Retail Scheme next year, bringing more Irish retailers into the age of e-commerce.

The Green Transition Fund will support Irish businesses on a journey toward zero carbon emissions.

Further to that, €3m has been allocated to establish European Digital Innovation Hubs, which will promote best practice in cybersecurity, artificial intelligence and computing among SMEs.

An extra €2m has also been allocated for Local Employment Offices to provide training to SMEs for digital adoption and climate action.

For those whose innovation is out of this world, an extra €3m for the European Space Agency programme will give Irish companies the opportunity to compete and win contracts in the space industry.

Rise in regional development funds

Overall, the Department of Enterprise, Trade and Employment’s core budget has increased by €103m, up 13.2pc on Budget 2021. This is a record core allocation for the Department, which is focused on Ireland’s post-pandemic economic recovery.

One point made by Damien English, TD, the Minister of State for Business, Employment and Retail, was that Budget 2022 will ensure “that the recovery and growth of the SME sector extends to all parts of the country”.

Supporting this will be an extra €5m to fund another call under the Regional Enterprise Development Fund from Enterprise Ireland.

Fighting off a fall in FDI

Finance Minister Donohoe could not get through his Budget 2022 without acknowledging the historic change in Ireland’s corporate tax rate agreed with other OECD countries last week.

“I strongly believe that our national interest is now best served by joining this agreement,” he said. “While there will be a cost to the Exchequer, it provides long-term certainty for businesses and investors for the benefit of Irish jobs.”

When this new rate comes into effect, Ireland will set corporation tax at 15pc, though businesses with revenues less than €750m will continue to avail of the 12.5pc tax rate.

It’s widely accepted that the OECD deal was necessary, but nonetheless it presents a new challenge for IDA Ireland, the State’s foreign direct investment agency.

“In addition to the other allocations to the IDA to enhance our regional offering and attract FDI to every county in Ireland, this Budget includes €6.4m to sell Ireland as an attractive location for investment,” said Robert Troy, TD, a minister of state in the Department of Enterprise, Trade and Employment.

Further allocations include €10m for the IDA’s Regional Property Programme, which prepares sites around the country for future FDI. With this, the IDA aims to have more regional properties available for investors in 2022 than ever before.

The IDA will also receive €4m for an Advanced Manufacturing Centre in Limerick, which will offer a state-of-the-art facility to both indigenous and multinational companies for the development of new technologies

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Elaine Burke is the editor of Silicon Republic

editorial@siliconrepublic.com