From left: Minister for Finance Paschal Donohoe, TD, and Minister for Public Expenditure and Reform Michael McGrath, TD. Image: Julian Behal Photography
Although Budget 2021 introduced significant supports for businesses, some believe the Government missed a few valuable opportunities for change.
Earlier today (13 October), the Government unveiled the national Budget for 2021, featuring a range of measures to support businesses through the Covid-19 pandemic and stimulate the economy and employment.
The budgetary package will be worth more than €17bn, which is somewhat unsurprising considering the cost of measures needed to support the nation through the pandemic and the uncertainty of Brexit.
Now that the big announcements are out of the way and the news is sinking in for businesses, we’re taking a look at how Budget 2021 has been received by different organisations and industry experts.
Supports for SMEs
David Shanahan, tax partner at Deloitte, said that Minister for Finance Paschal Donohoe, TD, outlined the importance of the SME sector as a central player in the recovery of the economy post-Covid. He added that supports for this sector will be “crucial” to recovery and will enable businesses to navigate ongoing uncertainty.
“In recognition of the significant challenges faced by this sector as a result of Covid-19, a report is expected to be put to the Minister in mid-November with proposals to establish an equity fund with a mandate to invest in high-innovation enterprises,” Shanahan said.
‘There is no magic bullet’
– ALAN MERRIMAN
He added that the Minister’s reference to a continued review of the Employment Investment Incentive Scheme (EIIS) is “particularly welcome”.
The EIIS allows investors to claim tax relief, and industry representatives have said enhancing the scheme could enable more SMEs to avail of suitable funding to grow businesses and create employment.
Strengthening the venture ecosystem
Noting that no two companies and no two sectors are the same, Alan Merriman, chair of Irish multi-family office Elkstone Partners, said Budget 2021 falls short in a number of respects.
“I think the Minister and Government know the Budget falls short – it is as they say, a bridge,” he told Siliconrepublic.com. “Undoubtedly, there is a wide recognition now that within the SME sector there are a multitude of different sub-sectors and challenges. There is no magic bullet.”
Like Shanahan, Merriman agreed with the establishment of an equity fund. “The announcement of an equity fund, which will marry Ireland Strategic Investment Fund monies and leverage European capital to invest in domestic high-innovation enterprises, is very, very welcome.”
But he added that not making material enhancements to the EIIS in the Budget was a “huge miss”.
“Thankfully there seems to be within Government and the Department a real appetite to properly tackle this comprehensively later this year – and this honestly cannot happen fast enough.
“I’m really hopeful that with this considered assessment to be conducted imminently, the right changes will be made and a powerful policy catalyst can really be impactful in bringing about a strong venture ecosystem and a win-win all round.”
Capital Gains Tax
Capital Gains Tax (CGT) has remained a contentious topic in recent years when it comes to the Budget. Technology industry representative groups like Scale Ireland have been calling for changes and improvements to the scheme.
John McGrane, executive director of the Family Business Network, said that today’s budget “goes some way toward enabling companies at the heart of the community to survive and thrive from one generation to the next”, however he claimed that the Government missed an opportunity by leaving the existing CGT system unchanged.
‘We are in the midst of what should be a once-in-a-generation crisis with Covid-19 and yet the spectre of a second, a no-deal Brexit, looms large over the Irish economy’
– JOHN DEVANEY
“Budget 2021 is a missed opportunity to unleash the job creation potential of family-owned firms by changing elements of our tax system,” he said. “Reducing the rate of CGT would have produced a win-win for the exchequer and for our local communities.
“Family businesses, much more than foreign direct investments, are here for good and they will play their positive part in helping to drive a jobs-led recovery.”
Despite his criticisms, McGrane welcomed new targeted cash grants for businesses affected by Covid-19 restrictions, stating that they will provide “much-needed relief” for family firms.
Ensuring supports are accessible
Ahead of Budget 2021, accounting body CPA Ireland conducted a survey to examine how SMEs can be best supported in the months and years ahead. Nearly three-quarters of respondents expected their businesses to be impacted by Brexit and 92pc are either “very concerned” or “moderately concerned” about Brexit.
CPA Ireland president John Devaney said: “We are in the midst of what should be a once-in-a-generation crisis with Covid-19 and yet the spectre of a second, a no-deal Brexit, looms large over the Irish economy this month. We welcome the Government’s firm commitment to SMEs announced in today’s budget.”
Like McGrane, Devaney welcomed new cash payment supports, along with the reduction in VAT for the hospitality sector. However, CPA Ireland warned that it is essential these new supports will be easily accessible for businesses.
“Straightforward implementation is essential for these measures to have a positive impact,” Devaney said. “At the start of the crisis there was an immediate and positive response. However, many difficulties emerged in accessing State supports, particularly by SMEs and unfortunately the Government has been slow to adapt.
“With the latest round of supports, it is essential that SME owners can access them quickly if they are truly to have a positive impact.”
