dublin chamber november 2010 newsletter
TRANSCRIPT
8/8/2019 Dublin Chamber November 2010 Newsletter
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What is damaging growth and will damage theprospects for growth is the perpetuation of the
existing sense of fatalism that hits you like a wall when
you arrive into Dublin.”– Peter Sutherland at the Dublin Chamber Annual Dinner 2010
Dear Member, Ufortuaty, h rght.
While Ireland’s recession may be over in
a technical sense, business and consumer
confidence is low; too low for our own good.
Uncertainty will continue to persist until such
time that clear decisions are taken about the
public finances. A credible plan – and one peer
reviewed and endorsed at EU level – should
result in a fall in the cost of borrowing and a
commensurate increase in business confidence.
The ‘wall of fatalism’ is an understandable
consequence of the exchequer’s deteriorating
position and the banking crisis. On the other
hand, we have not recognised (nor have we
had the drive) that it is possible to rebuild
economic growth on a sustainable basis. In our
Budget 2011 submission, entitled ‘Re-Building
Growth’, we champion a plan to balance
the books and the needs of businesses,
particularly SMEs.
Over the past two years, the Government
has taken a number of critical and unpopular
steps in an attempt to bring the exchequer
finances into balance. Dublin Chamber broadly
welcomed these steps as necessary and
recognises that further significant corrections
are required over the next four years. The
challenge is to restore balance to the public
finances while not dampening domestic
demand, particularly as the productive side
of the economy is at the limit in terms of the
burden of taxation.
Comprehensive public sector reform is a
prerequisite for restoring the public finances,
yet there is little evidence that agreed
actions have been implemented. Almost
half of the government’s deficit could be
met through savings in current expenditure
identified by ‘An Bord Snip’ and the Local
Government Efficiency Review Group.
Therefore, Government must use to full affect
the opportunity presented by the Croke
Park Agreement to improve the efficiency
and effectiveness of public service through
outsourcing, the redeployment of staff and the
phasing out of all non-essential services. We
need a public service that is fit for purpose.
The burden of government on SMEs is of
particular concern as the public sector now
accounts for half of the economy. The majority
of businesses in Dublin are SMEs and they
have been the most exposed to the economic
downturn. Results of a survey carried out by
Dublin Chamber indicate that 82 per cent
of SMEs have working capital problems,
with many struggling to remain in business.
In our budget submission, we called on the
Minister for Finance to tackle the working
and investment capital deficits faced by many
SMEs through the broadening of the Business
Expansion Scheme (BES) so that more sectors
can make use of it. We have also called for
the introduction of relief for venture capital
investors, similar to the UK Venture Capital
Trusts Scheme.
The economy has shown some resilience
in the performance of the exporting sector
and there have already been a number of
improvements in competitiveness recorded
by the National Competitiveness Council’s
Annual Competitiveness Report. Future
growth depends on the ability of the private
sector to regain lost competitive ground.
Government needs to take Ireland’s poor
competitiveness position more seriously. We
have proposed that the Minister for Enterprise,
Trade and Innovation sets about implementingthe findings of the NCC as part of his own
department’s contribution to Budget 2011.
In this newsletter, we outline a number of our
proposals to Government and the Department
of Finance which we believe would stimulate
business confidence. As a business leader in
Dublin, we invite you to communicate the
specific recommendations that matter to your
business with your colleagues and to your
elected representatives, in particular. Now
more than ever, we are demanding from our
politicians a clear economic and budgetary
strategy to bring an end to the uncertainty that
has persisted for far too long.
It is time to talk up the positives of the Dublin
city region.
With best wishes,
Peter Brennan
President
connecting | influencingOctober 2010
dUBlin BUsinessdUBlin BUsinessinfluencing decisions...
Dublin Chamber of Commerce, 7 Clare Street, Dublin 2. Tel: (01) 644 7200; Fax: (01) 676 6043
Gina Quin, Dublin Chamber Chief Executive; Peter
Sutherland S.C.; Peter Brennan, Dublin Chamber
President; and Robbie Henneberry, Managing
Director, AIB (RoI).
Budget 2011 in focus
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Above left: William Slattery, Executive Vice President of State Street International Ireland Ltd, addresses the
Dublin Chamber’s corporate members at the Dinner in Camera. Right: Enda Kenny TD, Leader of Fine Gael,and Peter Brennan, Dublin Chamber President, at the Dublin Chamber Annual Dinner.
Kpg th ‘CompttvFuamtaEarlier this month, Irish business
representatives from the Dublin Chamber
of Commerce attended the European
Parliament of Enterprises to debate and
vote on the issues concerning the future of
business in Europe such as the labour market,
the economic recession, energy issues and
international trade. The representatives
from Dublin Chamber in Brussels were givenassurances that the EU is not seeking to
interfere with Ireland’s corporate tax rate.
From their meetings with senior EU officials
and politicians, they were told that Ireland’s
rate of corporate tax is a national decision
and not one that the European Commission
will become involved in as part of the four
year budget review.
One of Ireland’s strengths is the transparent
nature of its taxation strategy. Uncertainty
with regards to corporate taxation will
jeopardise further foreign direct investment
and dissuade entrepreneurs from establishing
new businesses in Ireland. In this regard, the
Minister should reaffirm the status of the 12.5
per cent corporation tax rate for companies
trading in Ireland.
In its pre-Budget 2010 submission, Dublin
Chamber highlighted the need to stem the
losses to the exchequer from cross-border
shopping, to restore consumer confidence
and to secure jobs. Success in our
campaigh to reduce both VAT and excise
duty has helped to counter the perceived
attractiveness of cross-border shopping and
also to help sustain employment. Exchange
rate considerations and the increase in the
UK rate of VAT to a rate of 20 per cent will
consolidate these gains. Therefore, there
should be no increases in VAT, VRT rates,
excise duty and carbon taxation. Employment
taxation levels have risen sharply in recent
years, with the introduction of income levies.
The acceleration of corporation tax payments
for large companies introduced in the
Finance Act (No 2) 2008 poses a significantcash flow and administrative cost for large
companies. The requirement to estimate the
company’s full year corporation tax liability
six months into the year poses significant
challenges for companies. Companies that
believe that their 2010 liability will be less
than in 2009 but are unsure of the final result
feel, in many cases, that to avoid a risk of
incurring interest charges, they should pay
the preliminary tax based on the 2009 year.
No interest is paid by Revenue where the
preliminary tax is overpaid whereas interest
charges will accrue where the preliminary tax
is underpaid – creating an unfair situation.
Dublin Chamber recommends that no
additional corporation tax payment dates are
introduced.
There is significant international evidence
that city regions are the drivers of national
economic activity. Thus, if the Dublin
economy is performing sluggishly, so too
will commercial activity across the country.
Dublin’s ability to rebuild confidence and
growth is directly tied to Dublin’s competitive
position as an attractive destination to do
business, bringing together investment and a
talented labour pool.
connecting business...
dUBlin BUsiness
Dublin Chamber of Commerce, 7 Clare Street, Dublin 2. Tel: (01) 644 7200; Fax: (01) 676 6043
Rucg your rat bLast year, after Dublin Chamber’s rates
campaign across the four Dublin Councils,
we saw varying levels of reductions in
the commercial rates charged by those
councils, but the decrease was against
what the authorities initially wanted, which
was a holding of rates.
Next year’s rates will be set this
December and January by the councils
and Dublin Chamber is ramping up its
campaign to see another reduction. It is
rumoured that the Central Government
is looking to reduce its funding of local
government by ten per cent across the
board. Current expenditure of the Dublin
local authorities is almost €1.7 billion,
of which 37 per cent, or €625 million,
is funded by commercial rates. This is
well above the national average of 27
per cent. Dublin Chamber believes that
commercial rates must drop in proportion
to the Central Government’s reduced
contribution to councils. If Government
is paying ten per cent less for councils,commercial rates should equally drop by
ten per cent.
This of course will mean that Dublin’s
councils will need to cut their costs. As
part of this, Dublin Chamber has been
asked by Minister Gormley to represent
the business perspective on the recently
announced Dublin Efficiency Review
Group. In an exercise similar to ‘An Bord
Snip’, this small group will examine
how duplication and inefficiencies can
be removed from the current system.
Dublin Chamber will play a constructive
role in the group so that the reduced
cost of local government is passed on
to all ratepayers.
If Government ispaying ten per
cent less to councils,commercial rates shouldequally drop by ten percent.”
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Cut th cot of GovrmtA plan for implementing the
recommendations of ‘An Bord Snip’ and
the Local Government Efficiency Review
Group over the next three years needs to
be presented on Budget Day. These reports
have identified a large number of areas
where considerable savings can be made.
Local government in Dublin is big business,
with the four local authorities employing
some 10,000 staff and with an annual
budget of roughly €3 billion. These local
authorities provide many similar services in
areas such as waste, water, transport and
housing, resulting in duplication (actually
a quadruplication) of some functions – it isDublin’s citizens and businesses that foot
the bill for these inefficiencies through local
rates and charges, income tax, VAT and
other taxes.
The recent Local Government Efficiency
Review Group report assessed our local
government system and identified cost
savings and additional charges of a
mere seven per cent of the total cost of
running local authorities. Dublin Chamber
recommends that in addition to the
swift implementation of the report’s
recommendations that each local authority
be given a target to reduce current
spending by three per cent per annum.
If both of our recommendations were
implemented, local government current
spending could be reduced by €1 billion
in five years. Dublin Chamber believes that
dividends from making local government
more efficient should directly lead to
supporting jobs and businesses by reducingcommercial rates and charges. Central
government must allow local authorities
retain some of the savings that they make
from innovations in service provision.
Taoiseach, Brian Cowen TD, and Peter Brennan,
Dublin Chamber President, at the AGM Dinner
in February.
Rf o much capta for sMeThe Business Expansion Scheme (BES)
provides much needed financial support for
small business, particularly at a time when
SMEs are struggling. BES is a tax relief
incentive scheme that provides tax relief for
investment in certain corporate trades. The
scheme has taken much the same format
over a number of years because it is a form
of State-aid. Dublin Chamber believes
that the schedule review of BES should
be conducted urgently, with a view to
enhancing and broadening the applicationof the BES by removing the requirements
with respect to the qualifying trades
which companies must engage in. Such a
move could assist in alleviating the credit
difficulties faced by many firms.
A 2006 survey of BES companies conducted
by the Department of Finance found just
how important BES is for businesses making
use of it. Without the BES, many companies
said their working capital position would
have been dramatically effected and would
have required them to look for financing
either through a bank or elsewhere. In such
an uncertain time, this support for small
businesses has never been more important;
the BES is a lifeline to many and needs to
be reviewed in order to allow these
companies to survive.
In addition to a scheme similar to BES,
Dublin Chamber recommended that Budget
2011 introduce a programme similar to the
UK government’s tax relief for investors in
a Venture Capital Trust (VCT), which has
recently received EU approval. The VCT is
listed on the stock exchange and shares are
purchased by investors, with tax relief of 30
per cent on investments up to £200,000.
Dividend income is exempt from income
tax and the disposal of shares is exempt
from Capital Gains Tax (subject to a
minimum holding period).
“Investor confidence receded after the
financial crisis,” said Simon Drury of Climate
Change Capital Private Equity Fund on the
UK Venture Capital Trust. “Private-equity
firms started to support later-stage
companies which are less risky investments.
Venture capital and private equity are vital
sources of financing for the clean-tech
sector. Small and medium-sized enterprises
backed by venture capital have formed the
new generation of clean-tech companies.”
Dublin Chamber believes that an Irish
VCT would help address the financing
difficulties faced by many firms in
developing their businesses.
connecting business...
dUBlin BUsiness
Dublin Chamber of Commerce, 7 Clare Street, Dublin 2. Tel: (01) 644 7200; Fax: (01) 676 6043
John Hartnett, President and founder of the
Irish Technology Leadership Group, set out hisvision for how Ireland can emulate Silicon Valley
to foster venture capital here, at the Dublin
Chamber’s SMART Series on Innovation run in
association with Fujitsu.
Venture capitaland private equity
are vital sources of financing.”
local governmentcurrent spending
could be reduced by onebillion in five years.”