As anticipation for an early general election continues to grow, the Institute’s public policy team has made submissions to all of the main political parties setting out the key policy priorities we would like to see featured in any future Programme for Government.
Supporting small businesses
While the Government has acknowledged the financial pressures SMEs are under, many businesses remain constrained by rising labour costs. In a recent survey of our members, 90 percent of respondents identified labour costs as being the single biggest operating cost facing their business today with over 90 percent saying that these have increased over the past year.
With this in mind, we are calling for the next Government to:
1. Reduce Employers’ PRSI on minimum wage workers by 1.5 percent to mitigate the cost of auto-enrolment for employers
Currently employers’ PRSI is paid at a rate of 8.8 percent (8.9 percent from October 2024) and a reduction by 1.5 percent would cost the Exchequer an estimated €63 million in a full year. This proposal would compensate employers who will have to introduce pensions auto-enrolment during 2025 at an initial cost of 1.5 percent. The cohort most impacted by the new pensions scheme will be the estimated 164,000 minimum wage workers.
2. Think small first when it comes to introducing new legislation and regulations
SMEs have also had to deal with the introduction of an unprecedented number of new legislative requirements over the past 2 years, adding to their cost and administrative burden. One example is the introduction of enhanced reporting for employers meaning that employers have to report in real-time details of tax-free travel and subsistence and other benefits paid to employees.
Government needs to be cognisant of these challenges when implementing new regulations and have regard to the timing and suitability of same. It is important that small companies do not face any unnecessary or disproportionate regulatory obstacles to start up, establish and grow.
This can be achieved by:
- Strictly applying the ‘enhanced SME test’ across all government departments when introducing new legislation that will ultimately affect the bottom lines of SMEs.
- Staggering the roll out of new workplace legislation in a timely manner so as not to overburden employers with additional new costs all at the same time.
- Facilitating consultation and dialogue with SMEs and other impacted stakeholder groups before introducing new legislation or policy that affects small businesses.
- Reducing the frequency of reporting the payment of travel and subsistence and other benefits to a monthly or annual basis.
3. Simplify the tax regime for SMEs to encourage enterprise and innovation
It is acknowledged that businesses face a complex challenge in accessing tax reliefs and schemes and the Government has shown a desire for all businesses, especially SMEs, to know what they are entitled to claim and can access all appropriate schemes and reliefs.
However, there are several areas where improvements must be made including:
(i) Making share-remuneration more attractive by:
- Maintaining the Employers’ PRSI exemption, which offsets some of the cost of establishing share schemes.
- Deferring all tax charges for the employee until a sale or liquidity event occurs and allowing CGT treatment on a redemption of employee-owned shares.
- Enhancing the Key Employee Engagement Programme (KEEP) scheme by relaxing some of the onerous conditions for establishment which drives set-up costs.
(ii) Encouraging SMEs to claim the R&D tax credit
Larger organisations represent a larger proportion of the amount of R&D tax credit claims in a year. Smaller organisations are disincentivised from claiming an otherwise-available R&D tax credit on the basis of a lack of certainty, fundamental tax risk, and burdensome scrutiny of claims.
This can be achieved by:
- Offering an enhanced rate for small and micro companies of 50 percent.
- Simplifying the documentation and qualification requirements for SMEs.
- Introducing a Revenue pre-clearance system for first time claimants.
- Improving Revenue guidance targeted at SMEs and including a list of common pitfalls encountered by claimants.
(iii) Reduce Capital Gains Tax from 33 percent to 25 percent
Investment is critical in enabling start-ups to thrive and SMEs to grow and expand. A lower rate of CGT has been shown to encourage innovation and risk taking. It encourages the sale and purchase of assets, which drives investment activity. This would improve returns for entrepreneurs and in turn the Exchequer.
Improving childcare capacity and affordability for working parents
Childcare provision is part of the critical infrastructure necessary for a functioning economy. Access to affordable and good-quality childcare can play a key role in driving more sustainable and inclusive economic growth. In a survey of our members published earlier this year, 97 percent of respondents surveyed said that they had considered adjusting their working patterns as a result of not being able to find a childcare place while almost half of respondents signalled that they have had to reduce their working hours as a result of this. From a cost perspective, one third of members currently pay up to €1,000 a month per child on childcare with one third paying between €1,000 and €2,000 per child per month.
This is not a sustainable situation. To address these issues, we are calling on the next Government to:
1. Commit to a whole-of-government strategy which recognises childcare as part of the critical infrastructure necessary for the functioning of the economy.
This strategy should:
- Focus on encouraging the availability of flexible or part-time childcare places to reflect current work patterns. Targeted funding could be directed at facilities to offer more flexible offerings.
- Ensure adequate capacity in the sector by officially analysing and documenting childcare needs in local areas on a regular basis.
- Expand the work of the Access and Inclusion Model (AIM) programme which caters for children with a disability by creating a more inclusive environment in pre-schools through universal and targeted supports.
2. Ensure funding of the existing system reflects the true cost of service provision and encourages growth in the sector.
This can be achieved by:
- Regularly reviewing Core Funding to ensure that the model is suitable for the sector and enables providers to be sustainable, profitable and retain an ability to invest in their own services.
- Supporting an integrated system of full time and after-school care with both types of care adequately funded.
- Reflecting the additional cost burden placed on providers by the administrative requirements of Core Funding, the administration of the National Childcare Subsidies as well as the enhanced regulation experienced by childcare providers (and SMEs generally) by the introduction of new labour laws including pensions auto-enrolment, which is expected in 2025.
3. Enhance awareness of support subsidies available to parents under the National Childcare Scheme.
This can be achieved by:
- Ensuring that maternity hospital and Public Health Nurses to provide information on the supports available to new parents in the early years.
- Requiring childcare providers to highlight available supports to parents as part of the application process to register their child with the childcare facility.
- Translating the NCS portal into other languages as language barriers have been reported as being a barrier to claiming the subsidy.
As part of our pre-election campaign to promote the above advocacy agenda, in recent weeks representatives from the Institute have met with Minister for Enterprise, Trade and Employment Peter Burke and Minister for Finance Jack Chambers. In addition, we have engaged with senior officials at the Department of Children, Equality, Disability, Integration and Youth and have arranged forthcoming meetings with spokespeople from all of the main opposition parties.
As we approach the next general election, the Institute’s public policy team will continue to advocate for our members interests across the political spectrum. Should you have any questions on our campaign or wish to bring a specific issue to our attention, please contact the public policy team at publicpolicy@charteredaccountants.ie
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