- Government should not be misguided by the June Exchequer returns- domestic business is suffering.
- These figures show the Foreign Multinational sector powers ahead while our domestic sector is largely ignored.
- The SME sector is of systemic, irreplaceable importance to the State.
- ISME makes five appeals to the Government on behalf of SMEs, the backbone of the Irish economy.
The scale and aggressiveness of the business support measures announced by our EU neighbours and the UK must serve as a template to Government as the July Stimulus package is prepared.
While the Government may have been buoyed by the June Exchequer returns showing that total tax take rose over the June 20019 figure, the devil is in the detail. Corporation tax is up substantially, and income tax up marginally but there is a sharp reduction in VAT and excise yield. The income tax figures are misleading because Government wage supports are artificially supporting employment figures.
These figures explicitly show the ‘two economies’ problem that ISME has long identified, where our Foreign Multinational sector powers ahead due to non-domestic factors while our domestic sector is largely ignored.
Covid-19 is likely to change all this, whatever policy course Government follows.ISME CEO Neil McDonnell said today;‘The SME sector is of systemic, irreplaceable importance to the State. It accounts for more than half of our PAYE, PRSI and USC collection while two-thirds of VAT collection is again from SMEs. The Irish SME sector also accounts for three-quarters of total employment in this country. These are just a few things that ISME are asking the new Government not to forget when preparing the July Stimulus package.’
ISME notes there is no ‘Plan B’ to replace the contribution of the SME sector in our economy, therefore as much of it as possible must be saved.
While most SMEs have endured three months of low or zero sales, while owing (on average) €78,000 in trade credit to other SMEs, asking them to borrow money at market rates to cover their debts and sales losses makes no sense, and is totally out of kilter with actions in other member states. ISME calls on Government to:
- Provide direct liquidity support to SMEs. It is cheaper to do this than it is to allow them go to the wall, and their employees to go on social welfare.
- Direct liquidity will require the State to absorb some of the irrecoverable losses made by the SME sector due to Covid.
- Longer term liquidity for the SME sector will require debt financing at zero or negative rates, on very soft terms, with a 100% state guarantee, and a low administration burden.
- The economy will require stimulus measures to encourage consumers to spend. This will require reducing the VAT rate, even if for a defined period of time.
- The Government must commit to retention of the Temporary Wage Subsidy Scheme in the short term, and to a planned and gradual tapering of it after that.