Public Policy Bulletin, 31 July 2020

Jul 31, 2020


In today’s Public Policy news, take a look at some of the non-tax measures (including business and Brexit supports) announced in the July Stimulus 2020 to help business and economy recover. Also, you can read about the European Commission’s latest consultations on initiatives that aim to maximise the impact of taxation in meeting the EU’s climate goals, and the European Commission and European Investment Fund’s €100 million injection to support the venture capital market and innovative companies impacted by COVID-19.

 

Non-tax July Stimulus measures to help businesses

The July Stimulus 2020 includes a mix of tax and expenditure measures to help support economic recovery. The package is worth approximately €7.2billion, which includes €6.3billion of expenditure (or non-tax) measures. The non-tax measures include an extension of the Restart Grant, a waiver of commercial rates for six months, liquidity and enterprise investment measures, business loans and Brexit support. The measures are largely temporary and therefore the Government can fund them through borrowing and not by raising taxes. Read on for more detail on these measures.

The non-tax measures announced in the July Stimulus 2020 to help businesses and the economy recover include:

 

Restart Grant: The Restart Grant for Enterprises will be extended to include a broader base of SMEs and expanded by €300 million, bringing the total funding of the Restart Grant to €550 million. This will expand the number of firms eligible for grant funding and provide further grant funding to those that have already received the Restart Grant. Firms with up to 250 employees are now eligible.

Enterprises that could not access the original grant scheme, such as B&Bs and rateable sports businesses are eligible for a grant payment. The maximum payment under the Restart Grant will now be €25,000, increased from €10,000. The minimum payment will be €4,000, increased from €2,000.

 

Liquidity and Enterprise Investment Measures: A package of liquidity and enterprise investment measures worth €55 million will be put in place to support small and micro companies through additional resources for MicroFinance Ireland and the Local Enterprise Offices. This will include measures to reduce interest rates on lending for micro and small businesses, including grants equivalent to 0% interest on the first year of SBCI and MFI loans. 

 

A €25 million investment will be made in the Covid Life Sciences Products Scheme to aid the research, development and production of medicinal products in Ireland that are used in the fight against COVID-19.

 

To assist innovation driven enterprises, there will be an increase of €10 million in funding for the Seed and Venture Capital sector through Enterprise Ireland as a top-up to existing funds and leveraging a combined additional pool of €55 million.

Finally, the government will provide €10 million to support businesses engaging in green research, development and innovation, capital investment, and capacity building, through the first phase of a new Green Enterprise Fund.

 

Brexit Supports: A €20 million Brexit fund is being put in place to help SMEs involved in exporting and importing with the UK and further afield to hire staff and implement software and IT systems to be ready for new customs arrangements from 1 January 2021.

 

Credit Guarantee Scheme:  The €2 billion Credit Guarantee Scheme will enable the Government to provide an 80% guarantee for a wide range of credit products from €10,000 to €1 million, up to a maximum term of 6 years.

 

The Future Growth Loan Scheme: will be expanded from €200 million to €500 million with the European Investment Bank Group, so businesses with up to 499 employees can invest for the longer-term at competitive rates. 

 

Commercial Rates Waiver: A waiver of commercial rates will be granted to all businesses, with limited exceptions, for the six months to end-September 2020, at a total cost of €600 million.

 

Enhancement to Sustaining Enterprise Fund scheme: The government will expand the Enterprise Ireland €180 million Sustaining Enterprise Fund scheme to include direct grant support to viable businesses, in addition to equity and repayable advances.

 

Tourism: A €10 million Restart Fund for the Tourism sector, along with a €10 million pilot Performance Support Scheme for the culture sector are being introduced.

 

Online Retail Scheme: To assist businesses to develop their online presence, the Online Retail Scheme is to receive additional €5.5 million through Enterprise Ireland and an expansion by €20 million of the Online Trading Voucher Scheme from the Local Enterprise Offices.

 

"EU releases two Green Consultations" 

The European Commission has launched two public consultations on initiatives that aim to maximise the impact of taxation in meeting the EU’s climate goals: the Revision of the Energy Tax Directive (ETD) and the creation of a Carbon Border Adjustment Mechanism (CBAM). 

 

  • The review of the ETD is part of a series of measures announced in the European Green Deal. The Energy Taxation Directive 2003/96 lays down the EU rules for the taxation of energy products used as motor fuel or heating fuel and of electricity. However, since its adoption in 2003, energy markets and technologies in the EU have experienced significant developments. The EU’s international commitments, including the Paris Agreement, as well as the EU’s regulatory framework in the area of energy and climate change, have evolved considerably since then. The European Green deal adopted by the Commission on 11 December 2019 aims to transform the EU into a modern, resource-efficient and competitive economy where there are no net emissions of greenhouse gases in 2050 and where economic growth is decoupled from resource use. Well-designed taxes play a direct role by sending the right price signals and providing the right incentives for sustainable practices of producers, users and consumers. The consultation is now open until 14 October 2020.  

     

  • The new Carbon Border Adjustment Mechanism is a mechanism to counteract this risk of ‘carbon leakage’ that occurs when companies transfer production to countries that are less strict about emissions, or when EU products are replaced by more carbon-intensive imports. In such case global emissions would not be reduced, thus undermining Europe’s efforts to go climate-neutral by 2050 where international partners do not share the same climate ambition as the EU. The new mechanism would counteract this risk by putting a carbon price on imports of certain goods from outside the EU, ensuring that the price of imports reflect more accurately their carbon content. It would be an alternative to the measures that currently address the risk of carbon leakage in the EU’s Emissions Trading System (“EU ETS”). The consultation is now open until 28 October 2020. 

 

 

European Commission and Investment Fund unlock €100 million for businesses

The European Commission and European Investment Fund have developed a set of measures to support the venture capital market and innovative companies impacted by the coronavirus pandemic. The measures, channelled through the InnovFin Equity Facility within Horizon 2020, will translate into additional liquidity to strengthen the capital base of European SMEs and small mid-cap companies. In addition, a new €100 million Recovery Equity Facility for Innovative Technology will be launched to provide top-up investment capacity to fund managers to further support their portfolio companies negatively impacted by the crisis.

 

 

Read all our updates on our Public Policy web centre.