The majority of SMEs in the country have been adversely affected by COVID-19

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ISME issued its Pre-Budget 2021 Submission to Government this morning. While the Irish SME Association welcomes the extra liquidity measures provided in the July Stimulus, ISME are concerned that they will be insufficient to protect many SMEs and their employees.

The majority of small and medium businesses in the country have been adversely affected by COVID-19, while also having on average €76,000 of outstanding business debt. Many SMEs will struggle to settle some or all of this debt because of lost trade, and restricted trading in 2020 and 2021.

Most of the COVID-19 supports offered so far have been income supports for workers or debt-based solutions. The former cannot be used to settle business debts, and the latter is unpopular with both borrowers and lenders. More grant assistance will be needed. Grants must be decoupled from commercial rates.

The VAT system needs to be used far more aggressively to stimulate demand. The temporary top rate reduction to 21% should be made permanent. SMEs need at least a temporary reduction in the 13.5% rate to stimulate domestic services. And finally, in order to mitigate the costs of COVID-19 prevention, essential cleaning materials and PPE should be zero-rated for at least one year.

The restrictions on redundancy brought in under the COVID-19 emergency legislation will soon end. We can expect to see a significant increase in redundancies as a result. The redundancy payments resulting will be the difference between solvency and insolvency for some employers, as a result, ISME are calling for the Statutory Redundancy Rebate reintroduced.

If the Government is to go ahead with an ill-judged promise to increase public sector pay by 2% this year, it needs strings attached. Those sectors that do not agree to up-front reforms and efficiencies, at a minimum sufficient to fund those pay increases, should not have their pay increased.

The unqualified decision to top up public service pay by 2% stands in stark contrast to the decision to exclude proprietary directors from the new Employment Wage Subsidy Scheme (EWSS) which replaces the TWSS at the end of August. Proprietary directors have been some of the worst hit people in the Covid-19 pandemic, and will see this decision as a gratuitous snub by Government in favour of the most sheltered sector in Irish society. 

Finally, in order to address the productivity gap between indigenous and multinational businesses, ISME is asking for tax incentives to encourage participation by all business owners and managers in a basic business qualification to be known as the ‘Blue Cert.’

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