PRE-BUDGET 2016 SUBMISSION

Transcription

1 SMALL FIRMS ASSOCIATION SMALL FIRMS ASSOCIATION PRE-BUDGET 2016 SUBMISSION Presented to: MINISTER FOR FINANCE, Michael Noonan, T.D. MINISTER FOR PUBLIC EXPENDITURE AND REFORM, Brendan Howlin, T.D. MINISTER FOR JOBS, ENTERPRISE AND INNOVATION, Richard Bruton, T.D. 1

2 Contents 1. Overview of SFA recommendations.3 2. Introduction Context Taxation Capital Gains Tax - CGT rate - Entrepreneurial relief 4.2 Discriminatory treatment of entrepreneurs and the self-employed - USC surcharge - PAYE tax credit - Voluntary PRSI 4.3 Taxation of work - Marginal tax rate - PRSI - JobBridge, JobsPlus and social welfare - Pension levy - Childcare tax credit 4.4 Labour costs - Minimum wage - Pension provision 4.5 Investment issues - Employee share options - Access to equity investment 4.6 Other tax heads - VAT - Corporation tax - Local property tax 4.7 Adjustments to current schemes - R&D tax credit - Foreign Earnings Deduction (FED) - Employment and Investment Incentive Scheme (EIIS) 5. Expenditure Capital expenditure 5.2 Current expenditure 6. Conclusion..15 Appendix 1 CGT rates and revenue

3 1. OVERVIEW OF SFA RECOMMENDATIONS Implement the maximum fiscal expansion Expand the fiscal envelope by the maximum 1.5 billion referred to in the Spring Economic Statement; develop the NED into a medium- to long-term policy planning forum. Support investment and entrepreneurship through the tax system Reduce CGT rate to 20%; reform CGT entrepreneurial relief; abolish the USC surcharge; introduce a PAYE tax credit for proprietary directors; introduce a voluntary PRSI contribution for the self-employed. Make work pay without inflating labour costs Increase the entry point to the marginal rate of tax by 1,500; reduce the marginal rate by 1%; review employer PRSI and consider a phased-in approach; amend PRSI so that it is only charged on earnings above the threshold; phase in employer PRSI for new businesses; retain JobBridge and JobsPlus schemes; amend social welfare rules to encourage part time work; lapse the pension levy; introduce a tax credit for childcare costs; freeze the National Minimum Wage for three years; enhance Pension Board s education campaign; allow all tax payers 40% relief on pension provision; review the mechanism for calculating the State pension; introduce a more flexible approach to pension funding by self-employed people; revise tax rules on employee share options; introduce tax changes to attract international VCs to Ireland. Adjust and expand existing schemes for maximum economic benefit Retain 9% VAT rate for the hospitality sector; introduce 9% VAT on the construction of residential property for two years; introduce minimum thresholds for VIES and VAT MOSS; extend the turnover threshold for cash basis VAT to 2.5 million; retain start-up corporation tax exemption; revise local property tax valuation methodology; introduce an R&D Tax Credit Lite for small companies; amend Foreign Earnings Deduction rules; change EIIS scheme rules; revert EIIS scheme name to BES and enhance publicity. Define strategic expenditure priorities to improve business environment and enhance Ireland s competitiveness Improve broadband infrastructure; develop public transport, in particular link between Dublin Airport and city centre; invest in housing; enhance education and training; drive real efficiencies in the public service. 3

4 2. INTRODUCTION The Small Firms Association (SFA) is the trusted partner of small businesses in Ireland, with 8,500 members and six affiliated organisations in all sectors and parts of the country. Its mission is to deliver business-focused advice and insights to member companies, influence government policy to the benefit of small businesses and connect its members in a thriving community. The SFA welcomes the opportunity to submit our views on Budget 2016 based on our experience, insight and knowledge of the small business community, which comprises over 192,000 businesses, employing 860,000 people over half the private sector workforce. 3. CONTEXT The SFA recently participated in the National Economic Dialogue (NED), which we found to be a very useful process, allowing stakeholders to share their views and listen to and discuss the ideas of others. We would endorse developing this Dialogue into medium- to long-term planning discussions post Budget The SFA has a vision of Ireland as the most vibrant small business community in the world, supporting entrepreneurship, valuing small business and rewarding risk takers. Currently this vision is aspirational and significant policy reforms will be required to make it a reality. Budget 2016 comes at a time when Ireland s economic outlook is relatively positive. For many, the fragility of the crisis years has passed, but the recovery has not been consistent regionally or sectorally. Many small businesses are still waiting to feel the upturn. The SFA recognises the need for a prudent budget, with decisions based on evidence and sound economic principles. It supports, however, the expansion of the fiscal envelope by the maximum 1.5 billion referred to in the Government s Spring Economic Statement. The key to future success is investment and resulting growth. The key to our deficit reduction is growth. The key to job creation is growth. Growth is generated by a combination of measures including rising incomes, higher consumer spending, export growth, cost control, innovation and investment in infrastructural deficits. However, any growth model must place small businesses at the heart as they are the drivers of innovation and a permanent source of prosperity, employment and economic progress. This submission contains concrete proposals for how the Government can improve the business environment and support investment and jobs through changes in the tax regime and a strategic approach to current and capital expenditure in Budget

5 4. TAXATION Tax reform is key to unlocking job creation, investment and growth. The SFA has long advocated reform of the Irish tax system to make it more attractive and rewarding to establish and operate a business in Ireland. The tax system, which today has very mixed signals for business owners, must be brought into line with the stated Government aims to be among the most entrepreneurial nations in the world and acknowledged as a world class environment in which to start and grow a business (Action Plan for Jobs). 4.1 CAPITAL GAINS TAX Reform of the Capital Gains Tax (CGT) regime is the top priority of the SFA in Budget CGT is a key determinant of investment in the economy, which is a critical driver of growth. - CGT Rate Ireland has one of the highest rates of CGT amongst developed economies at 33% (except for some legacy reliefs relating to property). This puts Ireland at a competitive disadvantage when it comes to attracting and retaining mobile investment. For comparison, in the UK the rate is either 18% or 28% depending on the size of income and capital gains. The SFA is calling for a reduction in CGT to 20% across the board, to make investing in a business in Ireland more attractive, in particular relative to competitor countries. Most sophisticated entrepreneurs respond to high CGT rates by establishing holding company structures to defer CGT tax events. History has shown that a lower rate of CGT substantially boosts the overall tax take, so the Exchequer will also benefit substantially by such a move (see data in Appendix 1). - Entrepreneurial relief The announcement of the CGT Entrepreneurial Relief in Budget 2014 was welcome; however, the SFA remains convinced that the scheme is overly restrictive and will not work in its current format. The fact that the relief is given after the sale of a second successful business means in reality that it will take a decade before the entrepreneur will see any return and, in any event, the likelihood of having two successful start-ups in a row is questionable. The SFA proposes that this relief is amended to mirror the UK scheme, where CGT of 10% is due on the sale or closure of all or part of a business, on the condition that the entrepreneur has held the share for at least a year and is a director, partner or employee in the business. There is a lifetime limit of Stg 10mn of gains so the lifetime tax saving is limited to Stg 1.8mn. The introduction of a meaningful entrepreneurial relief in Ireland similar to that in the UK would cost 30 million. It is clear that EU State aid rules do not pose any obstacle to the changes outlined, as the same rules apply to the UK as an EU member state. 5

6 4.2 DISCRIMINATORY TREATMENT OF ENTREPRENEURS AND THE SELF- EMPLOYED In order to solve our unemployment problem, we are relying on more entrepreneurial people to set up new businesses. An Taoiseach, Enda Kenny, T.D., wrote in the foreword to the National Policy Statement on Entrepreneurship 2014 entrepreneurship has never been more important to the country, its people and its future but he has also conceded that the current treatment of entrepreneurs and self-employed people in the tax system is discriminatory. This latter issue must be addressed. It is critical that there is at least equity in treatment between employees and proprietary directors/self-employed people in the tax system and that risk takers are afforded an equal level of protection as their employees in the event of business failure or illness, if entrepreneurship in Ireland is to flourish with all of the benefits that would follow. - USC surcharge The 3% surcharge on USC, which applies only to the self-employed, should be expired (as promised at the end of 2014). This surcharge is out of line with the aim of encouraging entrepreneurship and scaling up of new businesses and sends a confusing message to the self-employed about the Government s support for them. The SFA estimates that the abolition of the surcharge would cost 60 million. - PAYE tax credit Proprietary Directors should receive the PAYE tax credit if they pay tax on a PAYE basis. The lack of a PAYE tax credit equivalent for self-employed persons and proprietary directors means their effective income tax rates are much higher than PAYE workers at the same level. The SFA advocates prioritising the introduction of the tax credit for proprietary directors, which is estimated to cost 225 million, and subsequently extending this to the self-employed, at an additional cost of 225 million. - Voluntary PRSI A voluntary PRSI contribution should be introduced, to allow entrepreneurs and the selfemployed qualify for social welfare benefits similar to their employees. However, any proposal which provides social welfare benefit for owner-managers cannot be mandatory or viewed as an opportunity to impose additional taxes on small business. 6

7 4.3 TAXATION OF WORK In a recent Small Firms Association survey, small firm owner-managers identified reducing taxation on employment as the most important thing the Government could change to boost their business. The current level of taxation has resulted in an erosion in domestic spending power, a reduction in the incentive to work and an increase in wage pressures which could potentially destabilise the recovery. The Government has added to overall wage costs in recent years through changes in PRSI, illness benefit, the redundancy rebate, health insurance and general taxation (which has an upward effect on wages over the long term). We welcome the acceptance by the Government that the income tax burden is now too high. The SFA has identified a number of policy changes that would help to ease this burden. - Marginal tax rate We require a tax system that rewards work, but in reality Ireland has one of the highest marginal tax rates in the OECD. Conditions around the marginal tax rate are crucial the marginal tax rate is the main avenue through which income taxation affects economic growth due to its impact on the incentive to work and take on extra work, and on the attractiveness of Ireland as a destination for talent. In Ireland, the marginal rate of tax comes into effect below the average wage. This, coupled with the high marginal rate significantly reduces the benefit of working additional hours or receiving a pay increase. Specifically, the SFA calls for the entry point to the marginal rate of income tax to be increased by 1,500 in 2016 for a single person with a corresponding increase for married couples and other tax cases. Personal tax credits should be increased by 100 for all income earners. These two measures combined are estimated to cost 338 million. In addition, the SFA strongly advocates a 1% reduction in the marginal rate of income tax. This would cost approximately 158 million. - PRSI Employer PRSI must be reviewed, in particular in the context of any increase in the minimum wage. The Low Pay Commission report clearly shows that, at the proposed rate of 9.15 per hour, the additional cost for an employer is per year whilst the employee will be worse off by 0.85 when PRSI, tax and USC are taken into account. These anomalies must be addressed. SFA members continue to report examples of the social welfare system working at odds with getting people back to work and increasing their hours of work. It is essential that action is now taken to remove these social welfare traps. For example, an employee on Class A PRSI pays 0% on weekly earnings up to 352. Once they go above that threshold, they have to pay 4% on their entire earnings, including the 352 that was exempt. This will have to be reviewed in the context of increases in the minimum wage but the SFA argues that whatever the new threshold, PRSI should only be charged on earnings above the threshold to incentivise employees to work more hours. 7

8 To encourage job creation, a new proposal would be to reduce or phase in employer s PRSI, so that new businesses pay reduced rates of employer PRSI on staff they recruit in their first three years for example 25% for staff recruited in year 1, 50% for staff recruited in year 2, 75% for staff recruited in year 3 and then the full rate on later recruitment. This would incentivise earlier hiring. - JobBridge, JobsPlus and social welfare The JobBridge Scheme continues to be well received by our members, with many converting the internships into ongoing jobs after the completion of the programme, and should be retained. Similarly, the JobsPlus programme is working very well for small firms recruiting new employees from the live register. We call on Government to introduce improved structures to incentivise social welfare recipients to take up part time work. Part time work has been shown to be a stepping stone to full time employment across Europe. However, the Irish social welfare system disincentivises jobseekers from taking up part time work. By way of example, one of our members in the home care sector, states the following: Under the current social welfare system, if carers work one hour in a day they lose their full social welfare entitlement for that day, which essentially means it will cost them to work. This situation could easily be rectified in one of a number of ways, for example by moving to calculating social welfare on an hourly basis rather than on a daily basis; by allowing part time workers to work a certain number of hours per week before they lose their entitlements; or by allowing the hours worked and social welfare to be taxed as a whole in line with the current tax system. Another solution would be that people who work part-time are allowed to add up their working hours in a week and only have Jobseeker s Allowance cut when they reach the equivalent of a full day s work. For example if a full day s work is six hours and above, then if the carer works three hours daily for five days or 15 hours per week, she loses 2.5 days of social welfare allowance (15 hours divided by six) rather than all five days as at present. In this particular sector, it is estimated there is a need for over 15,000 part-time carers over the next five years. - Pension levy The 0.15% pensions levy should be lapsed at the end of 2015 as promised. Not alone is the levy grossly unfair, as it is an expropriation of capital sums saved by workers in the private sector, but it contradicts Government policy on promoting private sector pension provision. - Childcare Tax Credit The prohibitive cost of childcare is forcing many skilled people to leave the workplace. Net childcare costs in Ireland are the highest in Europe at 35% of family income, which is three times the OECD average. It is critical that Government increases its supports for working parents through introducing a tax credit for childcare costs. 8

9 4.4 LABOUR COSTS Irish labour costs are the eleventh highest in Europe and 21% above the EU average. Irish small firms are at a competitive disadvantage relative to firms in the UK across a number of major business costs and total labour costs are 25% lower in the UK than in Ireland. This is a particular problem for SMEs in the services sector where the cost of employing an individual accounts for between 74% and 90% of location sensitive business costs (i.e. costs which vary by location rather than being set by a worldwide market). It is critical that, with 9.7% of the population still unemployed, the Government does nothing to put additional pressure on labour costs in Budget Minimum wage The SFA calls on the Government to reject the 5.8% increase in the minimum wage proposed by the Low Pay Commission on the grounds that it does not reflect the economic evidence and represents an artificial increase in labour costs. The minimum wage should instead be frozen for three years to provide certainty to small businesses. Whilst it is true that the economy is recovering, this recovery is still fragile for many small businesses and there are clear urban/rural divides in how well businesses are doing. Looking at the profitability of small businesses, it is clear that they will have grave difficulty absorbing labour cost increases without productivity gain. From an examination of the 2012 average gross (pre-tax) profits in small businesses in the sectors with the majority of National Minimum Wage (NMW) workers, it is clear that they would not be able to offset NMW increases against profits. In micro firms (1-10 employees), which are 84% of all businesses in Ireland, average pre-tax profits in Accommodation and Food businesses were 14,549, in Retail were 21,470 and Other Services were 16,582. This means that they will have no choice but to offset NMW increases against reductions in hours or jobs, job growth or capital or skills investment. A higher minimum wage will have a disproportionate impact on small businesses outside Dublin, where the NMW represents a higher proportion of the average wage. The SFA previously welcomed the establishment of the Low Pay Commission and its mandate to make independent, evidence-based recommendations on the National Minimum Wage, however, there is no evidence to support a 5.8% rise in the NMW at a time when just 40% of small businesses are in a position to give any pay rises and where they are, it is in the order of 2%. There is no doubt that a 5.8% increase in the NMW will result in knock-on relativity pay claims throughout the economy, regardless of the fact that this is specifically prohibited in the NMW Act. It is imperative for the competitive position of Ireland that wage levels are decided in a competitive labour market and are not constrained by an artificial legal instrument such as the minimum wage. If the Government accepts the recommendation it is vital that employer PRSI is reduced in Budget 2016 to offset the negative labour cost implications and that a six-month notice period is given to allow small firms to prepare for its implementation impact. 9

10 - Pension provision The SFA recognises the importance of building a sustainable pensions system for the future. It is fundamentally opposed, however, to any move towards a mandatory Universal Retirement Savings System. Mandatory pension provision will prove costly to employees, to business and to the Exchequer, without any associated benefits in the long term. The SFA strongly believes that credible alternatives to a mandatory Universal Retirement Savings System are available and should be pursued as a matter of urgency. The SFA believes that more can be done to encourage supplementary voluntary pension provision, by enhancing the Pension s Board education campaign and explaining in plain language both the pension products and the tax incentives on offer. The SFA believes that the PRSA concept needs to be revisited and made more attractive particularly for lowerincome workers to invest in. A key element of this would be allowing all taxpayers relief at 40% on pension provision, regardless of their income tax liability level. The current mechanism for calculating the State Pension should be reviewed. Consideration should be given to calculating the State Pension as a percentage of average retirement replacement income, rather than the current methodology of calculating it as a percentage of gross average industrial earnings. There are issues with this as it is variously measured and indeed is no longer directly relevant as two out of every three people are now employed in services. The additional funding necessary to support this should come from a combination of the Ireland Strategic Investment Fund and major public service pension reform and not from increased taxation on small businesses. Furthermore, averaging out all years from the first date PRSI is paid to retirement age penalises those who come in and out of the workforce or work part time for periods and encourages occasional and part time work to be carried out unofficially on the black market. The SFA would like to see a more flexible approach towards pension funding by selfemployed people, in contrast to the strictures that a Universal Retirement Savings System would impose. The system should take account of the fact that pension contribution at a meaningful level may only be possible for a very limited period for the self-employed. The UK approach involves a lifetime limit for pension benefits but allows flexibility to contribute up to 100% of earnings in any one year. The SFA would encourage exploring the adoption of a similarly balanced approach in Ireland. Increasing the number of people at work is the other way in which to improve the Pensioner Support Ratio. Therefore, to assist in reducing the projected funding gap for pensions, all efforts must focus on improving the economy s productive capacity and competitiveness. The introduction of a mandatory Universal Retirement Savings System, no matter what the eventual modalities, directly contradicts these efforts. PRSI already represents a pension scheme to which all employers and employees contribute. In the event that a Universal Retirement Savings Scheme is pursued contrary to the SFA s recommendations, it can only be considered in the context of an equal reduction in PRSI rates. 10

11 4.5 INVESTMENT ISSUES - Employee share options One of the changes which could have significant benefits for start-up companies is in relation to taxation of employee share options. The current situation is very inequitable and damages the ability of start-ups to attract talent. Employees who join young start-ups on these terms are every bit as much an entrepreneur as the company founders. Start-ups cannot pay salaries or offer benefits that compare to large established multinationals, so they must compete to attract talented employees by way of share options with potentially great future value. The reason this occurs is as follows: new employees cannot simply be granted ordinary shares, because that would trigger an immediate tax event for them, which they have no ability to pay for. Instead, they are granted stock options, which will be subject to income tax rates on exercise. There are some complex schemes (such as flowering shares ) which have been designed to avoid this issue, but they are too complex and expensive for a small company to implement. In short, there is currently no good way to reward early employees for the risks they are taking, and the vital contribution they are making to entrepreneurial activity in the Irish economy. Therefore, a mechanism should be available so that employees of start-up companies can be taxed on share options at CGT rates at the time when the purchased shares are disposed of. - Access to equity investment Ireland has a very short supply of experienced angel investors and venture capital when compared to the UK or the US. The lack of depth and experience in the Irish investor pool puts Irish businesses at a disadvantage, because convincing investors to invest outside of their home market is challenging. This occurs both for reasons of unfamiliarity, legal and currency risk, and due to specific home-market tax advantages such as the UK EIS scheme. Although this is probably the largest issue for Irish start-ups, it is not as easily addressed via a simple tax change. Ultimately the best way to fix this issue is through organic growth in the number of angel investors (who are typically former entrepreneurs who have sold their businesses); however it may be possible to attract some international VCs through targeted tax changes. 11

12 4.6 OTHER TAX HEADS - VAT The special 9% VAT rate for hospitality and related sectors has been a resounding success. We believe that the economic rationale for the scheme has not changed and that it should be retained. Furthermore, there should be no increases in other VAT rates or excise duties in order to avoid jeopardising domestic consumption. Shortages of housing units, especially in urban areas, are causing problems throughout the economy, distorting the cost of living and making Ireland a less attractive destination for FDI and mobile talent. Initiatives to encourage an increase in the supply of residential property should be brought forward in Budget For instance, a reduced VAT of 9% should be applied to the construction of residential property for two years to relieve the supply shortages without further increasing house prices. In addition, the SFA believes that minimum thresholds for VIES and VAT MOSS should be implemented. This would reduce the administrative burden on small companies with little impact on the Revenue figures. An extension of the turnover threshold for cash basis to 2.5 million would greatly assist small businesses in managing their cashflow, particularly given the ongoing difficulties in accessing overdrafts from banks to cover the VAT payment whilst they are waiting for payment by their own customers (which can include government bodies such as local authorities, HSE, etc.) - Corporation tax The SFA supports the retention of the first three years corporation tax exemption for tax liabilities under 40,000. Very few start-ups get to avail of the full 40,000 exemption but it is a valuable support, allowing start-ups to retain profits. - Local property tax The introduction of the local property tax has taken additional expenditure from the economy; placing many households under further pressure and impacting negatively on consumer spend. In order to encourage increased spending, the SFA believe a more equitable payment model could be applied, whilst at the same time ensuring revenue is received. The SFA would propose that the valuation of a property tax should be based on the property value less the outstanding mortgage. For example: Property Value 500,000 Current Mortgage 200,000 Taxable Valuation 300,000 The guiding principle is that the individual will not pay tax on monies which they are already paying interest on. This will also release additional disposal income to drive consumer spending which has been the key area of weakness in the economy since

13 4.7 ADJUSTMENTS TO CURRENT SCHEMES The SFA recognises the contribution of each of the tax measures currently in place to the Irish business ecosystem. While specific amendments are suggested below with a view to maximising the impact of particular schemes, the underlying obstacle to all government supports is low awareness and consequent low uptake. Schemes must be designed with ease of use in mind and more budget and effort is needed to communicate their availability amongst the small business community and potential entrepreneurs. - R&D tax credit We believe that it is necessary to create a specific, tailored R&D tax credit scheme for small firms to encourage more R&D spend R&D Tax Credit Lite. Such a scheme should reduce the existing complexity by using pro-forma templates for R&D project management, recording of R&D activity and calculations of costs and revenue benefit. Simple on-line calculators should be developed to increase usability for small firms and targeted promotion of the scheme should be rolled out. In many cases, owner-managers who engage in R&D do not qualify for tax credits following tax assessments by external Revenue-appointed experts. We need certainty about what will and will not qualify for tax credit purposes, particularly in micro-enterprises, where ownermanagers are likely to be engaging in R&D themselves, as this will greatly incentivise such companies who are wary of expenditure on R&D in the absence of the tax credit. The introduction of an R&D Tax Credit Lite along the lines outlined would cost approximately 5 million. - Foreign Earnings Deduction (FED) This scheme should be amended as follows to make it workable for small companies: Increase the scope of the scheme by extending the list of applicable countries. Include UK and other Eurozone countries if possible given EU State aid rules. Reduce the requirement for 60 days outside the EU to 20 days (as this is more realistic for a small company) and remove the minimum number of consecutive days. Extend support to trade fairs, as it is expensive for small companies to take a stand at large international fairs. - Employment and Investment Incentive Scheme (EIIS) An enhanced EIIS is essential to allow business balance sheets to recover and given the equity piece that banks need to make a positive lending decision. Our specific recommendations are as follows: Change the scheme rules: o Return to a five-year investment term so that the businesses have the necessary time to grow sufficiently to be capable of repaying the investors. 13

14 o o o o Remove employment and R&D criteria these complicate the scheme unnecessarily. By definition if the business grows these will occur, but it poses unnecessary risk to the investor up front. Evaluate the cost-benefits of extending the scheme to other specific sectors. Exempt the gain from CGT if it is held for seven years (similar to property reliefs already in place). Examine UK and international models with a view to implementing Government risk-sharing models with private investors in similar schemes. This would be important to attract non-traditional BES/EIIS type investors, and specifically other small business owners who might be interested in investing in other businesses. Return to BES as the scheme name, as this is more recognisable. Enhance publicity around the availability of the scheme. The only media reporting about the scheme tends to have a negative tilt from the perspective of the tax writeoffs, as opposed to recognising the importance of facilitating equity investment in what is viewed as relatively high risk domestic small businesses. In particular, promote the family and friends and private placement options, as well as funds option, and make it easy for companies to use the scheme without having to pay for expensive professional advice. 14

15 5. EXPENDITURE 5.1 CAPITAL EXPENDITURE Ireland s investment spend is currently the third lowest in the EU even though Ireland has the region s fastest growing population. Capital expenditure has made up over 70% of total expenditure cuts since To avoid infrastructure deficits arising from predicted demographic bottlenecks ahead, it is imperative that the Government restores capital investment. The Government should utilise the full flexibility in the EU fiscal rules in order to exempt this investment spending. In terms of capital expenditure, the Small Firms Association has identified clear priority items that would improve the business environment, ensure that businesses and citizens around the country benefit from the overall economic recovery and assist with the attraction of Foreign Direct Investment and talent. The SFA capital expenditure priorities are: Improving broadband infrastructure, particularly in rural areas; Developing public transport, in particular transport links between Dublin Airport and the city centre; Addressing housing shortages; Enhancing education and training (in particular through Skillnets, the funding for which should be restored to its 2008 level, at a cost of 10 million). 5.2 CURRENT EXPENDITURE On the current spending side, it is imperative that real reform of state expenditure takes place. Real efficiencies are needed and any increase in public sector pay must be linked to measurable productivity and service delivery improvements. 6. CONCLUSION Entrepreneurs and the small business sector, given the right economic conditions, will generate the growth needed to create jobs, overcome our debt burden and deliver the sustained prosperity and quality of life to which this country can legitimately aspire. Small business can lead the way in helping Ireland to continue to recover faster and stronger than others but in order to do this, the Government must create an enabling environment by restoring a sound macroeconomic base, reducing the cost of doing business, boosting productivity, and ensuring the delivery of world class performance standards across our public service. For further information, please contact Patricia Callan, SFA Director, on tel: / or patricia.callan@sfa.ie. 15

16 Appendix 1 CGT rates and revenue 's 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , % Receipts Rate Year Rate Receipts Receipts year on year % change , ,511 26% ,663 36% ,954 17% ,524 71% ,991 14% ,167-29% ,443, % ,515,555 5% ,959,659 29% ,099,933 58% ,105,495 0% ,430,080-54% 16

17 ,849-62% ,711-36% ,974 19% ,490-0% ,769-11% ,894-72% 17