Dublin Chamber November 2010 Newsletter

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



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...

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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.”



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.

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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.”

Documents

Dublin Chamber November 2010 Newsletter