BUDGET 2020 - Cork Chamber
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BUDGE T 2020 SUBMISSION
CORK CHAMBER | BUDGET 2020 SUBMISSION
Contents
Introduction to Budget 2020 03
What Our Members Say 04
Housing & Compact Growth 06
Carbon Tax & Sustainability Measures 08
Carbon Tax 08
Public & Sustainable Transport 10
Project Ireland 2040 12
Supporting Working Parents 13
Education and Skills 14
Competitiveness 15
Income Tax 15
Tax Equity 16
Corporate Tax 17
Capital Gains Tax 18
Indigenous Growth 19
Growing Tourism 21
Rainy Day Fund 22
Cork Chamber’s Budget Committee & Members 23
Cork Chamber, Fitzgerald House,
Summerhill North, Cork, T23 TD90, Ireland.
CorkChamber.ie
2CORK CHAMBER | BUDGET 2020 SUBMISSION
Introduction to
Budget 2020
Cork Chamber seeks to champion, promote and drive a strong vision for
Cork as the best place for business. A thriving location driven by a successful,
progressive and influential membership. Our 1,200 members who employ
100,000 people across Cork City and County are our motivation. We seek to
be dynamic, forward thinking, purposeful change makers and to be responsible
and inspiring.
This Pre-Budget Submission has been developed based on feedback from our members with guidance
from Cork Chamber’s Budget Committee.
Ahead of making this submission, we welcome the publication of the Summer Economic Statement by the
Department of Finance, the Budget 2020 Tax Strategy Group Papers and the organisation of the National
Economic Dialogue as important efforts to improve transparency around the budget preparation process.
Our suite of budget recommendations focus on improving life and business opportunities in Ireland.
We also present revenue raising options. We make our proposals in the following context:
» The ambitions of Ireland 2040 and the principle of compact-led growth
» The unemployment rate, which now stands at just 4.5% having peaked at 16% in 2012
» Forecasted GDP growth of 3.9% for 2019 and 3.3% 2020
» Increasing risks to our economy, including:
– a greater likelihood of a no-deal Brexit outcome;
– a risk of overheating in the domestic economy;
– a deterioration in the international trade policy environment; and
– heightened vulnerabilities around corporation tax revenues.
We recognise that current and capital expenditure commitments
BIG FIVE TO
amount to approximately €1.9 billion (including a €0.7 billion or
MAKE IRELAND
10 per cent increase in capital investment) and an expenditure
THRIVE
reserve of up to €0.2 billion to accommodate funding
requirements for the National Broadband Plan and National » Affordable Apartments
Children’s Hospital. This leaves €0.7 billion to be specifically » Balanced Budget
allocated as part of Budget 2020 unless additional revenue » Cutting Childcare Costs
raising measures are introduced. Overall, we recommend » Going Green
Government to take a prudent approach to public finances and
Signatures.pdf 1 25/07/2019 09:25 » Staying Sovereign
run a budget surplus.
Signatures.pdf 1 25/07/2019 09:25
on Tax
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Conor Healy, Cork Chamber CEO Seamus Downey, Budget Committee Chair
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3CORK CHAMBER | BUDGET 2020 SUBMISSION
What Our Members Say
Every quarter we survey the members of Cork Chamber on economic trends
and business outlook. The second economic trends survey of 2019 reports
on member experiences during April, May and June. Q2 included a focus on
Budget 2020 with survey responses on business priorities forming an intrinsic
part in developing our budgetary submission.
With the Climate Action Plan 2019 just recently published, Government have made significant
commitments to decreasing our collective national carbon footprint. It is imperative to all activity,
including economic activities and future growth, that behaviours and policies are changed. To do this, we
need supportive policies and opportunities for businesses to make this transition nationwide.
Our Q2 2019 surveyed members on budgetary measures to address climate change. The responses are
presented below.
% SUPPORT FOR BUDGET MEASURES TO ADDRESS CLIMATE COMMITMENTS
Carbon Tax
12%
Other
12%
Prioritisation of
funding for Public
None of & Sustainable
the above Transport
1% 52%
Tax incentives
for electric cars
23%
4CORK CHAMBER | BUDGET 2020 SUBMISSION
In the recent Cork Chamber submission to the ‘Use of Carbon Tax Revenues’, Cork Chamber highlighted
how critical it is to provide certainty for businesses to facilitate future planning decisions and investment.
12% of respondents indicated ‘Other’, with the consensus being that a combination of measures is most
appropriate, and with the majority highlighting the opportunities for public and sustainable transport.
We also asked about the overall direction of Budget 2020. Interestingly, the respondents – all of whom
are employers in Cork – favour spending in public services/investments and business competitiveness
measures over tax cuts by a significant margin.
WHERE SHOULD THE EMPHASIS OF BUDGET 2020 LIE?
Income tax cuts
10%
Increase spending
on public
Other services / public
19% investments
40%
Measures to improve
business confidence
31%
The ‘Other’ sentiments were predominantly focused on housing, infrastructure and transport investment.
5CORK CHAMBER | BUDGET 2020 SUBMISSION
Housing & Compact Growth
Project Ireland 2040 sets out an ambitious vision for the future development
of Irish cities with a focus on compact growth. A core Government objective
of the National Development Plan and the National Planning Framework is
that 50% of the population growth should take place in existing urban and
brownfield locations.
The implication of this target is that a significant increase in the number of apartments will be required,
allowing for greater densities in our cities and metropolitan areas. However, a viability gap currently
exists for apartment construction which is holding back development of new urban housing. In Cork, this
means that not a single large-scale apartment building has been completed since 2008. Until Ireland has
a well-functioning and viable new apartment construction market, we will not see the level of apartment
construction in Irish cities required to meet current and future demand, nor the objectives of Ireland 2040.
While housing is a growing social issue, our insufficient urban housing stock (in particular rental
accommodation) also remains a primary business concern which has a negative impact on the ability of
businesses to grow, hire and retain talent and contributes to wage inflation, thus impacting competitiveness.
Cork Chamber’s latest survey of our 1,200 members revealed the availability of housing/rental
accommodation as a top threat to growth, with Brexit ranked first, followed second by housing and third
skills availability. The same survey asked about Budget 2020 and specific measures to stimulate more
urban accommodation, which was supported by 91% of respondents.
% SUPPORTING TARGETED / TIMEBOUND MEASURES TO STIMULATE
CONSTRUCTION OF MORE URBAN ACCOMMODATION
NO
7%
YES OTHER
91% 2%
Together with the CIF Southern Branch we have commissioned EY-DKM consultants to assess the viability
and affordability of apartment building in Cork City. This report contains 16 policy options for Government
to consider in order to bridge the existing viability gap of constructing apartments. A copy of this report
has been forwarded to relevant departments.
6CORK CHAMBER | BUDGET 2020 SUBMISSION
RECOMMENDATIONS
1 Expand the Living City Initiative to incorporate newly constructed apartments and target tax relief at
owner occupiers and small-scale investors.
2 Review the tax regime for small scale landlords to encourage the retention and take up of new
apartments in the private rented sector.
3 Consideration should be given to providing tax-breaks for investing in innovation and the adoption
of new technologies in construction.
4 Extend the Help to Buy scheme beyond 31 December 2019 and introduce a more targeted scheme
with higher rebates for buyers of apartments in brownfield areas.
5 Waive Section 48 (and Section 49, where applicable) development levies for city centre designated
areas for a period of up to 2 years to encourage apartment development. This would reduce the cost
of a 77 sqm apartment by around €5,300 in total.
6 Pay market value for Part V and make Part V payments on a staged payment basis as the units are
built rather than at closure stage.
7 Consideration should be given to allocating a proportion of the Local Property Tax in the form of a rebate
to builders of apartments in city centres subject to meeting certain criteria (e.g. affordable pricing).
8 Reducing the cost of Irish Water‘s charges for apartment developments as there is less infrastructure
required for apartments than for housing on greenfield sites, yet charges are the same.
9 Site assembly to be progressed by Government and/or local authorities, or
10 Site clearance to be progressed by Government and/or local authorities
11 Cap contribution charge at a certain height or above a certain site density. It is further recommended
here that the Section 48 development levies be waived for city centre designated areas for up to two
years to encourage apartment development.
12 Earmark a proportion of the Local Property Tax to forward fund necessary infrastructure required to
service infill/brownfield sites within designated urban areas.
13 Reduce the VAT rate for construction on infill/brownfield sites for a limited period of time.
14 Use Urban Regeneration and Development Funding to boost property development in targeted
locations in major cities to support compact and sustainable development.
15 Carry out an assessment of the effectiveness of current building regulations.
16 Any new building regulations should be carefully evaluated against their impact on viability and
subject to a cost benefit analysis.
7CORK CHAMBER | BUDGET 2020 SUBMISSION Carbon Tax & Sustainability Measures Carbon Tax Cork Chamber is supportive in principle of a Carbon Tax with this support premised on a fair and equitable approach for business and communities to transition, and which negates fuel poverty and social inequity. Proposed tax increases must not take place in isolation. Alternatives must exist for businesses and consumers to mitigate a negative impact of an increase; with for example those in a rural environment being disproportionately affected in comparison to those in an urban setting with transport alternatives and transport infrastructure e.g. relative low permeability of electric car chargers in rural Ireland. We support the research ongoing to ascertain the impacts of a Carbon Tax increase by household income level and geographic location and the importance of this research to underpin future actions and measures to facilitate this transition for all. Cork Chamber supports the specific ring-fencing of existing and future revenues from Carbon Tax to aid the transition to a low carbon economy. Currently, the tax of €20 per tonne generates €440 million per year going directly to Government’s main treasury account. We contend that revenues generated from existing carbon taxes be ringfenced immediately and reinvested to support infrastructure upgrades to the national energy grid, the decarbonising of public transport, support for commercial and residential retrofits, and the enhanced deployment of electric vehicle charging infrastructure with a priority for areas that are either poorly served or indeed not served at all. Taxes from Carbon ring-fencing must be clearly directed to support policy interventions and to increase the affordability of alternatives to our current carbon intensive lifestyles. 8
CORK CHAMBER | BUDGET 2020 SUBMISSION
RECOMMENDATIONS
Ring fenced funds should be directed towards:
1 Funding sustainable transport including cycle infrastructure and public transport.
2 Broad climate actions, e.g. the introduction of a ‘green’ participatory budget to support climate
change mitigation and adaptation projects selected by local citizens such as is done in Lisbon. The
‘green’ participatory fund could be managed by Local Authorities directly.
3 Increasing the fuel allowance to compensate those households likely to suffer from fuel poverty.
4 Enhancing the current grants towards the cost of energy efficiency improvements in the homes of
those most vulnerable to fuel poverty through the Better Energy Homes scheme or the SEAI Better
Energy Warmer Homes scheme, e.g. a green mortgage model for business and homeowners. A
special type of loan designed to make energy efficiency upgrades more affordable to homeowners
and which have longer payback timeframes and favourable interest rates as is available for example in
the United States.
5 Acting as a buffer against increasing costs of doing business for businesses with no realistic short
to medium term alternative to continued fossil fuel use and for whom fossil fuels constitute a large
amount of overall business expenditures,
6 Incentivising businesses moving away from the use of fossil fuels to more sustainable production
methods.
7 Further supporting help-to-buy schemes to increase the purchase price affordability of electric
vehicles thereby increasing the accessibility of this option for businesses, support innovation in the
development and deployment of carbon neutral technologies, such as biomethane as a transport fuel
from agricultural and food waste.
8 Support for a subsidy regime for the large scale commercial deployment of renewable energy
generation.
9CORK CHAMBER | BUDGET 2020 SUBMISSION Carbon Tax & Sustainability Measures Continued Public & Sustainable Transport Cork has an immediate need for improved walking, cycling, bus and rail networks as increasingly employees seek the choice of commuting to work without a car. Better public transport is top of the list of Cork businesses’ needs and with over 10,000 jobs to be created in the next five years, the value of investing in walking and cycling cannot be underestimated. By rethinking the use of our existing infrastructure (pedestrianisation, quiet ways etc), there are many interventions which would immediately improve the attractiveness of using sustainable transport modes throughout metropolitan Cork at a relatively low cost and through funds raised via Carbon Tax. The draft Cork Metropolitan Area Transport Strategy (CMATS) has a very strong benefit to cost ratio of 2.48, which clearly demonstrates the huge potential in Cork for shifting commuting patterns. Given such a positive return on taxpayers’ money, we recommend that early funding is released, and that delivery is focused on realistic short-term interventions that reap immediate benefits for people living or working in Cork. 10
CORK CHAMBER | BUDGET 2020 SUBMISSION
RECOMMENDATIONS
1 Funding for the National Transport Authority to establish an oversight and delivery office in Cork to
implement CMATS as an important signal of intent.
2 We recommend early funding raised through Carbon Tax be granted by Government for the
National Transport Authority/local authorities to deliver on quick wins for sustainable and public
transport, which will have a positive impact on the environment. For example, as suggested in our
submission to CMATS;
– Pedestrianising the Marina in Cork, including cycling lanes
– Developing quiet way cycling routes as have been done in the UK, US and Netherlands and
which could be influential in promoting a change in mode to cycling at a modest cost.
– Extending the rail commuter zone to include Mallow, which will immediately make it much
more economically attractive to commute by train to/from Cork.
– Developing dedicated bus corridors to improve the reliability of bus services
– Growing usage of BlackAsh P&R through investment in a dedicated bus corridor into the city.
We note there is already sufficient road space to designate one lane as bus only.
– Dunkettle P&R together with a priority bus corridor into Cork City should be prioritised early, to
coincide with Dunkettle Interchange Upgrade.
– Investing in the walkability of the Cork Metropolitan Area. As with all investment this should be
sequenced to prioritise routes that would engender the highest modal shift from car over the
short to medium term.
– Planting and greening across Cork presents an immediate benefit to pedestrians and cyclists.
– Protection of existing cycling infrastructure to enhance safety.
– Kilbarry train station development should be progressed without delay.
– Improving frequencies of Cork’s existing rail and bus services reaps immediate benefits.
11CORK CHAMBER | BUDGET 2020 SUBMISSION
Project Ireland
2040
The National Development Plan and Ireland 2040 firmly endorse Cork as
Ireland’s second city and set clear targets for future population and jobs
growth. For Cork to achieve Government’s vision of becoming the fastest
growing city in Ireland over the next 20 years and to sustainably accommodate
new people, investment and employment, the city requires upfront investment
to maximise opportunities.
Investment in infrastructure has been a major concern of business in Cork and nationally over the last
number of years following a decade of under investment during the economic downturn. 18 months into
its announcement, the National Development Plan has yet to deliver final investment certainty to any
of the major infrastructural enablers for Cork. The development of Project Ireland 2040 involved years
of stakeholder engagement and consultations, and the final result marks a step-change in Irish spatial
planning. It is therefore imperative that commitments made in these plans are realised and that long
neglected investment in infrastructure increases.
RECOMMENDATIONS
1 Clear timeframes of projects and spending commitments announced in the National Development
Plan must be delivered upon with particular emphasis in this region on BusConnects, cycle
infrastructure, the M28 to Ringaskiddy, Dunkettle Interchange upgrade, M20 Cork-Limerick
Motorway, the N22 Cork-Kerry road and the Eastern section of the Northern Ring Road.
12CORK CHAMBER | BUDGET 2020 SUBMISSION
Supporting
Working Parents
The high cost of childcare often means that for parents, and especially lone
parents, it does not make economic sense to work after having children.
Childcare costs in Ireland remain among the highest in the OECD for both
couples and single parents. The participation tax for women with two children
in Ireland who must pay for childcare is a staggering 94%1 as highlighted by
Tax Strategy Group, which in turn has a significant impact on female workforce
participation.
The challenges of retaining women in the workforce inhibits diversity and constrains the labour market.
This has been highlighted as a concern by Cork Chamber’s members and is in part attributed to the
difficulty employees face in accessing affordable childcare. By ensuring access to affordable, high-quality
childcare services (including after-school care) throughout the country, we can reduce living costs for
families, enhance female labour market participation, address the gender pay gap, improve the outcome
of children, and increase Government revenue through a higher rate of labour force participation.
We welcome recent Government decisions to extend the Early Childhood Care and Education Scheme to
cover a second year and the establishment of the National Childcare Scheme providing subsidies of up to
€5.10 per hour for babies placed in registered childcare facilities. We note that an additional €50m will be
needed to deliver the first full year of the affordable childcare scheme in 2020 and recommend that continued
financial commitments are delivered to ensure that childcare is adequately financed in the long term.
RECOMMENDATIONS
1 Build on additional funding allocated in last year’s budget with a focus on accessible, affordable and
high-quality childcare services.
2 Increase investment in the affordable childcare scheme and the ECCE Scheme to cover the
requirements for 2020.
3 Incrementally increase total investment in childcare to 1% of GDP, as recommended by UNICEF.
4 Review of costs and barriers to entry to grow the childcare sector, such as insurance, local rates,
childcare affordability etc.
1 https://assets.gov.ie/4437/131218110520-4b2fade89c4a49dda62b98d824ea1c96.pdf p.13
13CORK CHAMBER | BUDGET 2020 SUBMISSION
Education
and Skills
Tertiary colleges are experiencing a demographic bulge in student applications
yet are already operating at capacity. Cork alone will see 8,000 additional third
level students over the next ten years. Furthermore, Brexit has contributed to
a significant increase in applications from foreign students to study in Ireland
which is to be welcomed.
However, after years of cutbacks in our third level sector over the last decade, it is critical that higher
education funding deficits are addressed and that a sustainable funding solution is introduced to enable
our third level institutes to invest in new programmes, teaching, and capacity to sustain projected growth
for the Cork region. This is particularly pressing for providers such as CIT, which are prohibited from
borrowing to improve their infrastructure.
Furthermore, skills shortages, particularly across engineering disciplines, have been a consistent threat to
members of Cork Chamber in recent years. The delivery of engineering programmes being disincentivised
by funding cuts, which impacts disproportionately on STEM programmes and the skills shortage for these
disciplines. Our Q2 economic survey of members revealed that 43% of businesses report difficulties
in recruiting for open vacancies. Against these findings and the return to full employment in the wider
economy, we ask Government to strengthen investment in workforce development, thus enabling more
people to upskill and support lifelong learning.
RECOMMENDATIONS
1 Increase government funding in higher education and implement a sustainable funding solution
for higher education nationally to support projected jobs and population growth, and to deliver on
commitments made to Tyndall, Munster Technological University and UCC in Project Ireland 2040.
2 Build on Budget 2019 by growing state funding for workplace development to allow for upskilling of
Ireland’s existing workforce.
14CORK CHAMBER | BUDGET 2020 SUBMISSION
Competitiveness
At a time of growing international protectionism, it is important to make
targeted changes to our own national tax system to improve the overall
competitiveness of Ireland Inc. Below we set out a series of targeted changes
that collectively would significantly improve Ireland’s attractiveness as a place
to do business.
Income Tax
At present, high marginal tax rates apply at relatively low levels of income. Employees earning less than
the average industrial wage pay the higher rate of 40 percent in income tax, starting at just €35,300.
This represents a significant tax burden on average income earners, with knock-on impacts on female
labour market participation, welfare traps, disincentives for over time, and our ability to attract and retain
international talent (which in turn indirectly impacts our corporate tax base).
At the same time, the Tax Strategy Group’s paper on Income Tax show that 35% of all earners in 20192 are
exempted from paying income tax, which is neither right nor equitable and contributes to the high tax
burden placed on workers with average incomes.
RECOMMENDATIONS
1 For Ireland to become more competitive as a destination for international workers and investment,
our corporate tax rate must be complemented by an effective and attractive personal tax regime.
We ask Government to commit to reviewing and making incremental changes to income tax
rates over a multi-annual basis. This avoids average wage earners falling into the higher tax
bracket and enables Ireland to become more in line with comparable OECD countries to maintain
competitiveness.
2 Over several budgets, we also request Government to broaden our income tax base to bring more
people into the tax net, better aligning with OECD averages and reducing the burden on middle
income earners. This measure would also raise revenues.
2 https://assets.gov.ie/19115/a4fd24e1129046a2a074776a69402675.pdf p.6
15CORK CHAMBER | BUDGET 2020 SUBMISSION
Competitiveness
Continued
Tax Equity
Ireland’s taxation system should ensure that innovators, investors and entrepreneurs are recognised as
contributors to growth and are taxed fairly. We propose a range of measures to improve the environment
for Irish business owners and we ask Government to implement changes to the taxation system that will
support entrepreneurship and drive growth in our economy.
The Programme for a Partnership Government includes a commitment to increase the value of the Earned
Income Credit to €1,650 to match the PAYE credit. We recommend that this measure be introduced in full
as part of Budget 2020.
RECOMMENDATIONS
1 Bring the Earned Income Tax Credit for self-employed in line with the Employee Tax Credit as
previously committed to. The earned income tax credit for self-employed individuals currently sits at
€1,350 annually, which is €300 less than an employee.
2 Self-employed individuals earning more than €100,000 are faced with an additional USC burden of
3% more than a PAYE worker earning the same amount of income. Government should introduce full
equity in taxation between self-employed and PAYE workers.
16CORK CHAMBER | BUDGET 2020 SUBMISSION
Corporate Tax
Ireland’s clear and transparent corporate tax system and corporate tax rate of 12.5% have been
contributing factors for multinationals choosing to locate their operations here. Certainty in tax is
an attractive asset and should be valued in the face of global changes. This is particularly important
considering the reform of the US corporation tax code, the UK’s forthcoming exit from the European
Union and ongoing discussions at EU-level regarding a Common Consolidated Corporate Tax Base and
digital taxation.
Ireland’s corporate tax receipts have increased dramatically in recent years, up 125% (equivalent to
€5,770M3) in 2018 when compared to 2014. We propose that the increase in corporate tax receipts are
used to build up the Rainy Day Fund in the short to medium term.
Although experts do not see a threat to the sustainability of Ireland’s corporate tax receipts in the immediate
term, it should be emphasised that Ireland is a small open economy and is very exposed to external shocks.
The increasing concentration of Irish corporate tax receipts could pose a risk to the Exchequer. For this
reason, we favour a move to a broader tax base which will reduce exposure to external shocks.
Significantly, many other economies are proactively reducing their corporation tax rates. While the scope
for Government action in mitigating these factors is limited, it is imperative that Government continues to
be mindful of the multifaceted risks while constructively engaging in ongoing international developments.
RECOMMENDATIONS
1 We recommend that Government ensure Ireland maintains sovereignty in taxation policy, while
working with international partners and the process of OECD actions on Base Erosion and Profit
Shifting to enhance fairness in international taxation.
2 Government must maintain and reiterate Ireland’s 12.5% Corporate Tax Rate and offer businesses
certainty in the face of global changes.
3 We recommend that Government exercise caution in over-reliance on corporate tax receipts and
considers transferring the revenue raised from over profile corporate tax receipts into building up
the Rainy Day Fund while building a broader, more stable tax base.
3 https://www.revenue.ie/en/corporate/documents/research/ct-analysis-2019.pdf p.6 Table 1
17CORK CHAMBER | BUDGET 2020 SUBMISSION
Competitiveness
Continued
Capital Gains Tax
Ireland’s Capital Gains Tax (CGT) rate of 33% is the fourth highest in the OECD, 10% above the median
rate in the OECD, and acts as a disincentive to diversification.
Whilst noting commentary in the Budget 2020 Tax Strategy Group workpapers, in our members’ view
Ireland’s CGT rate as it stands provides a disincentive to setting up business in Ireland for both domestic
and foreign entrepreneurs, and arguably acts as an incentive to off-shoring for domestic entrepreneurs.
Consequently, Ireland’s CGT rate dampens business activity and causes stagnation in terms of scaling,
investment, and the purchasing and selling of businesses that is needed for Irish indigenous industry to grow.
Cork Chamber proposes that our rate of CGT is reduced to allow Ireland to compete more favourably
with the UK, which in turn will stimulate further investment. We note the observation of the Tax Strategy
Group in 2019 that moving to a 25% rate over a two to four-year period at a total estimated cost of
€272m (in the absence of behavioural changes). However, the group also notes that a rate of 25%
would position Ireland near Norway and Denmark for international competitiveness, and would bring
benefits from increased transactions, an improved environment for business, enhance economic activity
and growth, increased Exchequer revenues, and assist new company formation. To encourage domestic
entrepreneurial activity, we recommend Government to also align the Entrepreneur Relief with that of the
UK including value and lifetime limit.
RECOMMENDATIONS
1 Improve the competitiveness of our CGT model by reducing the effective tax rate to 25% over two
to four consecutive budgets to support economic activity, scaling and new company formation.
2 Align the lifetime limit of the Entrepreneur Relief with that of the UK to support domestic
entrepreneurial activity.
3 Extend the 10% Entrepreneur Relief to both dividends and capital gains thereby making it tax neutral
for the entrepreneur whether they receive a return in the form of dividend income or a capital gain
and reducing the incentive to sell high growth SMEs early.
18CORK CHAMBER | BUDGET 2020 SUBMISSION
Indigenous
Growth
In addition to supporting the scaling of companies via CGT reform, we
note the warning of the National Competitiveness Council (NCC) about the
concentration of the domestic economy “on a small number of firms, in a small
number of sectors, leaving the economy vulnerable to shocks”. Consequently,
we ask that Budget 2020 and Government policy places a larger emphasis on
supporting the growth of indigenous businesses.
As flagged by the NCC, “the majority of firms in Ireland demonstrate stagnant or declining growth in
productivity”. Government must do more to support entrepreneurs and enable microbusinesses to grow
and succeed. In 2017, R&D expenditure in Ireland was 1.05% of GDP, which was far below the EU average
(2.06%) and the best performing EU country, Sweden (3.4%). Ireland currently ranks ninth in Europe
when it comes to R&D spend. This must be improved if indigenous businesses are to grow and become
more productive. The OECD has found that the current offering of tax credits is not always well suited to
the needs of smaller, domestic firms or young businesses. They outline that Ireland’s direct government
funding of business innovation and research lags behind many competitor countries.
Cork Chamber proposes that the rules regarding tax credits are simplified for SMEs to incentivise more
take-up. Uncertainty regarding whether one will get the tax credit acts as a disincentive to apply for the
tax relief, and this is especially the case for SMEs. We believe that simplified documentation requirements
should be required where for example SMEs have already satisfied the requirements of an Enterprise
Ireland or IDA R&D grant. Other incentives such as EIIS and KEEP should be amended following review to
improve uptake and accessibility by SMEs.
4 http://www.competitiveness.ie/Publications/2019/ICS-Press-Release.pdf
19CORK CHAMBER | BUDGET 2020 SUBMISSION
RECOMMENDATIONS
1 Cork Chamber asks that the ambiguity of qualifying expenditure is addressed as part of the
forthcoming budget, involving legislative changes if necessary. Additionally, there should be some
identified safe harbours and enhancements that SME businesses can avail of with administrative ease
to encourage higher R&D tax credit take-up rates, such as:
– Exempt SMEs from the scientific test where the relevant R&D activities have already been grant
aid approved by another State agency up to €100,000
– Provide a mechanism for pre-approval of the R&D tax credit claims for SMEs
– Allow an upfront repayment of the repayable R&D tax credit, rather than over three years,
for SMEs
– Increase the limits on outsourcing R&D to other companies and third level institutes thereby
encouraging greater collaborative R&D opportunities and access to appropriate talent to drive
innovation and growth
2 Enhance the effectiveness and ease of administration associated with both the KEEP and EIIS
schemes by acting on feedback to the relevant Department of Finance consultation processes to
make them fit for purpose.
20CORK CHAMBER | BUDGET 2020 SUBMISSION
Growing
Tourism
Tourism is our country’s largest source of indigenous employment accounting
for 4% of GDP.
The British tourism market is the largest in Ireland and in Cork. However, since the British vote to leave
the EU we have seen a reduction in the number of UK visitors to our shores, although to date most of this
decrease has been made up for by an increase in visitors from the US and continental Europe.
Brexit is the greatest challenge to face Irish tourism since the global economic recession of 2008, where
the value of the UK market fell by 23% in the space of 12 months. Its impact will hit the regions the
hardest. Compounding issues such as rising insurance and wage costs means that the tourism sector
currently faces competitiveness challenges and choppy waters ahead. We ask that the budget contains
specific measures to support employment in tourism and to grow the number of overseas visitors.
RECOMMENDATIONS
1 In recognition of the hugely important role that tourism plays for job creation and retention
especially in local economies outside of Dublin, we ask that Budget 2020 increases funding for
Tourism Ireland to grow overseas visitors. Any further funding should be diected towards growing
regional tourism against specified targets.
2 Add €2m per annum to the Tourism Ireland regional access fund for 2020 onwards to support
diversification in a post Brexit environment.
3 Further funding for capital grants towards tourism product development.
4 Fast-track and expedite insurance reform and a new book of quantum.
5 Funding to deliver on the Cork Events Centre.
21CORK CHAMBER | BUDGET 2020 SUBMISSION
Rainy Day
Fund
Government announced the establishment of a Rainy Day Fund in Budget 2018
and a first tranche of funding worth €500m was set aside in Budget 2019.
With corporate tax receipts up to its highest ever recorded level in 2019, we
propose further funding to be set aside for the Rainy Day Fund.
Cork Chamber views the establishment of the Fund as an opportunity to ensure greater long-term stability in
capital spending. The National Development Plan is underpinned by projections of the economy’s potential
growth which is assumed at a minimum of 2% over the period 2022 to 2027. Using the Rainy Day Fund to
support the delivery of the National Development Plan would ensure that we don’t find ourselves unable to
maintain investment in capital infrastructure in times of recession.
As the fund is established and built up, we suggest that Government utilises capital to invest in low risk
capital projects, such as our education sector or PPP-schemes identified in the National Development Plan to
make a return on taxpayers’ money. The fund should not be used for day-to-day expenditure.
RECOMMENDATIONS
1 Build up a Rainy Day Fund and utilise available funds on low risk capital investments and Public
Private Partnership projects committed to in the National Development Plan.
22CORK CHAMBER | BUDGET 2020 SUBMISSION
Cork Chamber’s Budget
Committee & Members
Our thanks to the budget committee who have volunteered their time to help
prepare this submission.
» Seamus Downey, EY (Chairperson)
» Stephen Keohane, KPMG
» Andrew O’Brien, PWC
» John Fuller, J W O’Donovan Solicitors
» Jackie Coughlan, Deloitte
Thank you to our members, for informing our quarterly Economic Trends, which is invaluable in the
development of our submissions.
Thanks also to our Public Affairs Council and Partners for guiding, validating and supporting a progressive
policy agenda for the Cork business community.
Together we are
making CORK the best
place for business.Fitzgerald House, Summerhill North, Cork, T23 TD90, Ireland. T +353 (021) 4509044 E info@corkchamber.ie CorkChamber.ie
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