5 things SMEs need to know about Budget 2019
In a somewhat staid budget dominated by Brexit plans, there was little fanfare from the Government. For SMEs, it was relatively lacklustre, but the VAT increase for tourism and hospitality raised hackles.
Read on for some of the key points SMEs need to know.
More to be done to close the tax gap
According to the CEO of the Irish SME Association, Neil McDonnell, the increased capital spending in yesterday’s (9 October) Budget is welcome, but some areas were frustratingly lacking in specifics.
McDonnell lamented the lack of movement closing the taxation gap between the self-employed and PAYE worker. This was echoed by Pádraig Cronin, tax partner and vice-chair at Deloitte, who said: “While some measures were taken to reduce the personal tax burden for workers, and close the tax differential between employed and self-employed individuals, there is more that needs to be done to overhaul the personal tax system and reduce marginal tax rates.”
McDonnell added: “Regarding entrepreneurial tax reliefs, the KEEP scheme, which failed to engage SMEs last year, has been tweaked.” Editor of Siliconrepublic.com, John Kennedy, laid out the issues with the KEEP scheme yesterday in detail.
DBEI gets cash injection
Tax director at PwC, Hugh Campbell, noted that the 9pc increase earmarked for the Department of Business, Enterprise and Innovation (DBEI) is likely to have an effect on SMEs. “A lot of the funding will go through the SME sector.” Campbell described the €300m Future Growth Loan Scheme as “significant to the SME sector”, as well as agribusinesses around Ireland.
The scheme in question is part of a long list of Brexit provisions made in the Budget. The Strategic Banking Corporation of Ireland is now preparing to begin administration over the project. 40pc of the funding will be for the agri-food sector, which is particularly exposed to Brexit risks.
Indigenous enterprise and regional growth
Minister Heather Humphreys, TD, said the €10m extra for IDA’s Regional Property Programme will be crucial for regional enterprise development and job creation. “This extra funding is critical to winning investments into regional locations. In 2015, the Government unveiled a five-year IDA plan aimed at accelerating the jobs recovery in every part of the country.”
The Government also named the border and midlands regions as priority areas for Project Ireland 2040, with advanced facilities set to be built in Dundalk, Monaghan, Sligo and Athlone, as well as Limerick and Waterford.
€2.75m will also be allocated to Enterprise Ireland to fund a support programme of regional innovation and technology clusters. Minister Pat Breen, TD, said: “Building enterprise capability in the regions is a key driver of productivity growth and resilience.”
A blow to SMEs in hospitality and tourism
Campbell dubbed the budget overall as somewhat “neutral”, extending to “marginally positive” for certain SMEs. The main sticking point is, of course, the increase in VAT in the tourism and hospitality sector, which comprises a large volume of SMEs, particularly in regional areas of the country.
He predicts the increase in VAT from 9pc to 13.5pc will cause “huge issues”. At the time the 9pc rate was introduced, Ireland was in the depths of a recession, and the Government said the new economic environment warranted an increase. Campbell said many in the industry will “be up in arms”.
Tax director at Deloitte, John Stewart, added: “It is anticipated that the increase in the VAT rate should impact more on profitability of businesses, rather than prices charged to customers. Also, the department stated that the 9pc rate was regressive, benefiting better-off households disproportionately more than worse-off households.”
The Government has said that it would be allocating €35m to the Department of Transport, Tourism and Sport to provide more targeted supports to the sector. It remains to be seen whether this will be enough be quell the concerns of tourism and hospitality SMEs.
Regulation of peer-to-peer lending
Minister for Finance Paschal Donohoe, TD, said his ministry would be examining the growth of crowdfunding, an option many SMEs consider. The Central Bank and the Government will “review the withholding tax obligations for peer-to-peer (P2P) lending activities, with a view to their amendment as appropriate following the introduction of regulation”.
Tax specialist at PwC, Ana Speranska, explained the rationale behind this budgetary decision: “The simplification of withholding tax requirements for P2P lending platforms is to facilitate the growth in this market and to allow for P2P lending platforms to be able to operate in a similar way to financial institutions when issuing loans (possibly by means of avoiding withholding tax on interest payments).”
The post 5 things SMEs need to know about Budget 2019 appeared first on Silicon Republic.