Confirmation that the Employment Wage Subsidy Scheme (EWSS) will remain in place in a graduated form until 30 April 2022 will give vital certainty to over 39,000 employers who are still registered for the support, Chartered Accountants Ireland said today. Reacting to Budget 2022, the largest professional accountancy body on the island of Ireland said this support is key to helping the SME sector to return to pre-pandemic trading levels.
Business supports
Norah Collender, Professional Tax Leader, Chartered Accountants Ireland said
“Today’s decision to extend the EWSS until 30 April 2022, avoiding any cliff edge, will come as a major relief for many small businesses that are still not operating at full capacity, for example in the tourism, hospitality, and entertainment sectors. These supports cannot last forever, but their presence over the last 18 months has been an example of a targeted, partnership-based approach by the state which has kept many businesses afloat.”
In contrast, the Institute referenced the decision to not reduce Ireland’s rate of Capital Gains Tax, among the highest in the EU, from 33 per cent as a missed opportunity, noting the role that a reduced CGT rate could have played in supporting entrepreneurship and encouraging investment in SMEs that need capital.
The Institute also noted the announcement by Government that new companies can continue to benefit from a reduction in corporation tax, with companies now able to avail of this for the first five years of trade, an increase on the previous limit of three years.
Collender said
“The struggle for survival is a reality for start-up companies, and that struggle is even more acute for businesses starting out just as the country recovers from a pandemic and ongoing Brexit disruption. A reduced corporation tax liability for such business will help cash flow and is a worthwhile endorsement of the Irish entrepreneurial spirit.”
Carbon reduction measures
Ireland’s enterprise sector accounts for just over 13% of the economy’s total emissions. According to the Institute, there was very little in today’s Budget to incentivise those businesses to help achieve the 7 per cent annual emissions reduction that the Government has committed to over the next decade.
Commenting, Cróna Clohisey, Public Policy Lead, Chartered Accountants Ireland said
“Businesses, particularly SMEs, will play a crucial rule in meeting the Government’s net-zero carbon emissions targets by 2050. However, businesses can only deliver if they are supported by the right policy frameworks and incentivised by Government to commit to carbon-reduction targets.
“The absence in this Budget for example of an enhanced R&D Tax Credit to fast track the development of green technologies making renewable energy cheaper and more readily available, is a real missed opportunity.”
This lack of incentive and alternatives for businesses to make a different choice, also applies to consumers, with the Institute noting that the biggest challenge of tackling climate change continues to be changing human behaviour.
Clohisey continued
“Any positive environmental impact of carbon taxes is limited by the lack of alternatives for consumers. Higher diesel and petrol prices will not have any real impact on car usage or carbon emissions until affordable alternatives are provided to consumers. Electric cars remain expensive and while the extension of the BIK exemption on electric cars out to 2025 is broadly welcome, the grants available to purchase new electrical cars should be extended to second hand electric vehicles.
“Similarly, today’s carbon tax rise is effectively cancelled out by the resulting need to increase the weekly fuel allowance payment. Continuing to increase the fuel allowance without accelerating the retrofitting of homes for those in fuel poverty risks leaving the State in a holding pattern, without forward momentum towards net-zero.”
Supporting home working
The pandemic has shone a harsh spotlight on how the taxation system reflects the costs for employees working from home. To date, tax relief can only be claimed on expenses incurred for equipment used “wholly, exclusively and necessarily” in the performance of the duties of employment, with a strict interpretation of this resulting in complex rules and slim odds of making a successful claim. Restrictive tax rules for making claims for costs of utility bills have resulted in a low uptake to date by remote workers.
Norah Collender, Professional Tax Leader, Chartered Accountants Ireland said
“Fairer and more accessible tax rules must be developed as part of an effective strategy for remote working. The Institute has previously called for a similar measure to the UK’s ’express claim’ tax relief to be considered by the Irish Government; while more modest, it is easier to claim. Today’s increased relief for 30 per cent of electricity, heating and broadband costs will only facilitate the hybrid working model if the tax relief is straightforward for claimants.”
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