Retain 12.5pc corporate tax, says Strategy Group

8 Jul 2004

The long-awaited report of the Enterprise Strategy Group has made a range of sweeping recommendations, including the Government reiterating its commitment to the 12.5pc corporation tax rate, the retention of the BES scheme, increasing the current Leaving Cert completion rate to 90pc as well as significant investment in State infrastructure ahead of demand.

Welcoming the report, Tánaiste Mary Harney said: “The key message above all is that we must adapt and develop our strengths if we are to succeed in tomorrow’s knowledge economy.”

The Enterprise Strategy Group, headed by tech veteran Eoin O’Driscoll (pictured), was established last year in response to the growing realisation that Ireland was losing its competitive edge internationally.

One of the first recommendations of the report relates to the sales and marketing ability of Irish businesses and indicates that Ireland’s prowess in production and manufacturing has not been matched in the sales and marketing arena. It calls for the establishment within Enterprise Ireland of a dedicated structure entitled ‘Export Ireland’ with its own budget to promote market intelligence and promotional activities.

Also recommended is the placement on a cost-sharing basis of 1,000 graduates and internationally experienced professionals in Irish firms to augment the stock of national sales and marketing talent. The report also calls for IDA Ireland to target European sales and marketing headquarters projects from locally-based multinationals and smaller companies in the early stages of internationalisation.

In terms of boosting Ireland’s prowess in the areas of innovation and R&D, the report recommends the establishment of a dedicated structure entitled ‘Technology Ireland’ with its own budget and leadership for market-led applied R&D. Public funding, the report states, for applied research and in-firm R&D should be increased to match that invested by the Department of Enterprise, Trade and Employment in basic research.

As well as this, the report calls for the allocation of a €20m budget for five years from existing enterprise development agency resources to support the creation of all-Ireland, enterprise-led business networks to support businesses where complimentary strengths are recognised.

Continuing on the theme of R&D, the report recommends the continuation of funding Science Foundation Ireland and Higher Education Authority research programmes beyond the current National Development Plan, as well as the creation of a Chief Scientist for the country to optimise Ireland’s current investment in science and technology. It also calls for the drawing up of a national R&D strategy statement with an integrated approach to policy formulation when needed.

In terms of ensuring that Ireland has the right skills base, the Strategy Group recommended a ‘One Step Up’ initiative focusing on bringing people with low levels of qualification and in low-paying occupations higher up the ladder through educational opportunities. As part of this the report called for an increase in the current Leaving Cert completion rate to 90pc as well as creating new work-study qualifications equal to the Leaving Cert.

In terms of preventing future skills shortages, the report argued that the proportion of graduates in Ireland should be in the top 10pc of OECD countries and that the quality of qualifications from Irish academic bodies be benchmarked internationally.

One of the core recommendations of the report was the retention of Ireland’s perceived attractive taxation regime, fundamentally the Government’s reiteration of a 12.5pc corporation tax rate on trading profits. The report also recommended the Government influencing the EU to have Vat on business-to-consumer electronic transactions charged at the standard rate in the customer’s location. R&D tax credits were also recommended in the report as central to the increasing of levels of R&D in Ireland and this should be monitored and modified as necessary.

The report by the Strategy Group called for the creation of a more effective, agile Government, with a quarterly cabinet meeting dedicated purely to enterprise and involving the Secretaries General from the Departments of Finance, Education & Science, Communications and Agriculture as well as at least four senior people from the enterprise sector.

In dealing with competitiveness and cost in the economy, the Strategy Group called for a transparent Regulatory Impact Analysis of different market sectors by the relevant government departments with a strong screening role by the Department of the Taoiseach. Interestingly, the Strategy Group recommended greater financial participation by employees in how businesses are run insofar as rewarding workplace productivity and promoting employee commitment to business goals, increased productivity and reduced costs.

In terms of infrastructure, the Strategy Group called for investment in infrastructure ahead of demand and the development of a strategic investment programme for the period beyond 2006 in the areas of broadband, roads, waste management, air services and energy.

A key aspect of the report was entrepreneurialism and that “businesses must accept change as a fact of life.” Among the recommendation were the retention of the Business Expansion Scheme and Seed Capital Scheme, the introduction of a syllabus on entrepreneurialism at second level and the stimulation of the creation of seed capital funds in the private sector.

Another core point was on the workplace whereby individuals should be facilitated to manage work, learning and caring commitments throughout their working lives through a restructuring of pensions and other benefit schemes.

Tánaiste Mary Harney said: “Ireland’s economy has performed exceptionally well over the last decade and we have built a world class reputation across a range of technologies. The challenge now is to maintain and grow this performance. Our future depends on how well we manage the transition to a world where knowledge and ideas are more important than bricks and mortar. Every economic region is trying to capitalise on new technologies and new markets. If we are to succeed we have to do the same but must be more creative and flexible than our competitors.”

Acknowledging that the Report provided an important road-map for our future economic strategy, the Tánaiste added: “The report presents us with the challenges we face if we are to retain our premier league status and details the actions we must take if we are not to drop down the league. The areas of competitive advantage identified in the Report reflect the Government’s vision of the country as a unique reservoir of knowledge and intellectual capacity combined with a strong research and innovation driven industry base.”

Enterprise Ireland acknowledged that the report will have a significant impact on its new strategy which will be published this Autumn. The agency said in a statement: “The report explicitly recognises the potential of the indigenous business sector to increase substantially its value to the economy going forward. It also emphasises the crucial importance of exports and technology in delivering a strong vibrant indigenous base.

“Publication of the report provides an opportunity for all engaged in enterprise generation and support to reflect on and recognise the significant contribution that the enterprise sector makes to the economy. It comes at an appropriate time as businesses endeavour to meet the significant challenges of an evolving and increasingly sophisticated and competitive global market. This requires a change in business model from cost plus to value add.

“Enterprise Ireland will take fully on board the clear direction set out in the Enterprise Strategy Group’s report in the development of its new strategy which will be published in the Autumn.”

By John Kennedy