Budget reaction: small firms need more support

7 Apr 2009

The plight of small businesses in the current economy has not been addressed in the supplementary budget, industry groups have warned. Opportunities such as VAT reduction have been overlooked.

“The very significant tax increases, coupled with the Government’s commitment to cost reduction and containment, demonstrate that all stakeholders are making a contribution,” Seán Murphy, director of policy at Chambers Ireland said. “We hope that this will start the process of restoring confidence.

“The delivery of the report of the Commission on Taxation is required as a matter of urgency, so that the necessary taxation changes – including the broadening of the tax base to incorporate a local property tax – can be made sooner rather than later. We urge the commission to conclude its work as soon as possible,” he said.

“The planned Asset Management Agency –done right – will underpin the national banking system and deliver enhanced credit flows at reasonable terms for Irish business and the wider economy. The reaffirmation of the 12.5pc corporation tax rate is critical to the future retention of foreign direct investment opportunities.

“The decision not to reduce employers PRSI is disappointing,” Murphy continued. “Moreover, a reduction in the rate of VAT would have raised additional revenue and helped reduce the wide fluctuations in trade and services patterns in the border region arising from currency and VAT differentials. Furthermore, commitments to retraining for the unemployed cannot be made at the expense of workplace-based training,” he added.

“We trust that the measures announced in today’s budget represent the end of the beginning of the process of stabilising the national finances, rebuilding confidence, and restoring Ireland’s competitiveness,” Murphy said.

Eamon Siggins of Certified Public Accountants warned that micro businesses are in meltdown due to severe cash flow problems and the inability to source working capital.

“This is an immediate problem, which is leading to weekly job loss increases. Regrettably, there is nothing in this budget to support entrepreneurs and existing businesses in cash flow difficulties. Some form of micro loan guarantee scheme was expected to allow the banks to prudently provide working capital or start-up capital.

“Without it, we will continue to see businesses close and our dole queues grow longer. The budget may well have been comprehensive in introducing measures to address the budget deficit, but jobs in the micro business sector remain under threat,” Siggins warned.

The UNITE trade union dismissed today’s budget as doing nothing to address the underlying crisis of job losses. It has also called for a general election, so that alternative and better options can be put to the people.

“This Government is seeking to escape recession through taking money out of the economy,” said UNITE regional secretary, Jimmy Kelly. “It has never worked in any economy, and it will not work here.

“Saving and creating jobs is the only way to work this out. Each job lost costs €20,000 in lost tax and increased social welfare. It also has a direct negative impact on other jobs.

“The blanket doubling of income levies hits the lowest paid the hardest. How can this be considered as fair?,” Kelly asked.

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years