Skills bandwidth is key, warns IIA as it proposes tax changes

14 Jul 2011

A pioneering programme that would require creating tax credits, repatriation grants and PRSI waivers has been put forward by the Irish Internet Association, aimed at ensuring the 2,500 vacancies in Ireland’s ICT sector are filled and that entrepreneurs can access vital talent, like developers and animators.

It is unthinkable that at a time when more than 450,000 people are out of work in an economy hit by recession that there are still thousands of jobs waiting to be filled. The problem is Ireland has no shortage of law or finance graduates but skilled software developers, animators and engineers are hard to find.

This is creating difficulties not only for overseas technology giants based in Ireland but has created a “pain point” for Irish entrepreneurs who want to build businesses and in turn grow in the Irish economy as opposed to locating elsewhere.

There is evidence of a significant cohort of skilled Irish people and people who work for Irish companies located around the world in other countries and in locations like London and Silicon Valley who, with the right financial incentives would consider returning to Ireland.

The IIA proposes that along with gathering data from employers on the critical skills that are required and the exact number of vacancies in the country, a new weighted application form of skills assessment would be created.

The individual employee will apply to revenue online for “Critical Skills Retention and Development” reliefs where, upon successful application (having attained ‘skill criticality’ status), they will be awarded additional tax credits, PRSI waiver, repatriation grant or some such incentivisation measure.

This will act as an effective means of encouraging those who might otherwise emigrate to stay working in Ireland. It will also act as an incentive to repatriate those who have left and facilitate the immigration of others from abroad, solidifying Ireland’s position as a leading digital economy.

Keeping the world’s best talent here

The chief executive of the Irish Internet Association Joan Mulvihill said that Ireland needs to maintain a reservoir of the world’s best talent to work here and compete against other countries with similar ambitions to create a strong toehold in the digital economy.

With major operations of Facebook, Google, Zynga, Amazon, PayPal, Apple and many others located in Ireland, the country can rightly claim the title ‘Internet Capital of Europe’ but this crown will be tarnished as long as skills issues prevail.

“Not only do we need better broadband bandwidth, we need better skills bandwidth,” Mulvihill told Siliconrepublic.com.

I asked economist Constantin Gurdgiev if he believed the proposals would work. He said they were sound and that it is vital we address the situation creatively and proactively. He said the solution is paramount not only for multinational employers who function as businesses within their businesses here in Ireland but for entrepreneurs and indigenous firms, too.

He said Ireland has done very well in terms of exports from FDI companies and that trend will continue long into the future, but the benefits those exports will bring will only matter if the profits can be retained in the country. That can only be achieved if indigenous firms can grow and create employment and those employees can spend in the local economy.

Time for radical thinking

“Radical thinking is necessary to stimulate sustainable, high value-added growth. It requires creating a real, functional and extensive human capital base in Ireland, through improved education, training, individual investment in skills, knowledge, creativity and entrepreneurship.

“However, in the short run, we must recognise that it will take too long to address the existent skills deficits through the education system. We also have to face the reality that our current tax system penalises human capital, disincentivising skills accumulation in Ireland.

“The only tools we have to support real, high value-added growth today is via rebalancing incentives for people with high skills, right attitudes to creativity and entrepreneurship, to stay in Ireland and to come here from abroad,” Gurdgiev said.

I spoke to Andrew Kavanagh of Digital Hub-based digital animation company Kavaleer, which is at present looking to hire skilled digital animators. “It is creating a genuine pain point and despite their prowess in winning BAFTAs and Oscars, Irish indigenous digital companies are competing against larger multinationals for developers and designers.”

Mulvihill said there’s a tight window of time that the country can do something creative and clever to solve the skills problem and she proposes the tax and PRSI changes be kept open during a five-year period.

She said Irish indigenous internet firms, such as Paddy Power, are trying to create jobs but need to access the right talent. Her proposal has been backed by Paddy Power, PopCap Games, Kavaleer, PayPal and many others.

“Failure to address this skills issue in the coming 12-18 months will have irreparable consequences for the future of the sector. We will cede our best people to other countries that are already pursuing strategies to lure the best talent to their own ‘smart’ economies and with that our future entrepreneurs and further FDI,” said Mulvihill.

Photo: Chief executive of the Irish Internet Association Joan Mulvihill

John Kennedy
By John Kennedy

Editor John Kennedy is an award-winning technology journalist. He joined Silicon Republic in 2002 to become the fulcrum of the company’s news service He was recipient of the Irish Internet Association’s NetVisionary Technology Journalist Award 2005 and Siliconrepublic.com has been awarded ‘Best Technology Site’ at the Irish Web Awards seven times. In 2011 he received the David Manley Award commending him for his dedication to covering entrepreneurs. His interests include all things technological, music, movies, reading, history, gaming and losing the occasional game of poker.

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