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Ibec calls for €6bn support for businesses in Budget

Employers’ group Ibec has called on the Government to provide an additional €6 billion in supports for businesses in the upcoming Budget.

In a pre-Budget submission, Ibec said the economy “is not yet ready to carry itself” and that the Irish business model faces its most significant challenge in over half a century.

Ibec said the Government could and should run a deficit of €30 billion this year but it should also do “whatever it takes to combat the economic crisis while it lasts”.

That means running another substantial deficit of €15 billion next year. 

It recommends the new wage subsidy scheme should be reduced gradually beyond its current limits and only be removed from companies when revenues return to 90% of normal.

It also wants the 9% VAT rate reinstated for the hospitality sector and personal services industry.

Ibec is calling for an arbitration system and Government support to solve disputes over commercial leases and wants Revenue to write down tax debts.

It also believes back to-work schemes should be open-ended until unemployment is brought down to 6%.

Ibec Director of Policy and Public Affairs Fergal O’Brien said: “The scale of the challenge facing us from both Covid-19 and Brexit means that the economy will need ongoing support in 2021.

“The significant, but temporary, income supports currently in place are providing life support to many sectors and jobs across the economy.

“The Government has provided €20 billion in direct support to the economy in 2020. As those supports are withdrawn, in the first half of 2021, it is important that they are not all withdrawn at once,” he cautioned.

“The economy is not yet ready to carry itself. A new stage of policy measures will be needed to rehabilitate the economy, strengthen our competitiveness, and ensure recovery,” he added.

Among the other proposals put forward by Ibec in its budgetary submission is an improvement to the Capital Gains Tax entrepreneurs’ relief.

The measure, introduced in 2016, gives a CGT rate of 10% on gains from the disposal of qualifying business assets, with a lifetime limit of €1m.

It was reduced from an initial rate of 33%.

Ibec called for the lifetime limit to be increased to €15m and expanded to “passive investors” in areas with high growth potential. 

It also proposed exploring a dispute resolution mechanism regarding commercial leases, along the lines of a Swedish model recently introduced, which would involve some state burden sharing in order to provide short term protection from eviction. 

It recommends the ability of businesses to write down Covid-19 tax debts under the Revenue tax warehousing scheme in circumstances where the debt threatens business viability. 

“If SMEs are left with significant balance sheet damage, this would represent a significant blow to the growth potential of the most labour intensive sectors of the economy,” the report concludes.

The business group also proposes introducing a number of budget measures to assist firms that stand to be negatively impacted by Brexit. 

Among the measures it proposes under this heading is the extension or re-introduction of the Employer Wage Subsidy Scheme for Brexit affected companies in the event of no trade deal being reached. 

“The scheme should be put on a scenario contingent footing and be reintroduced on a temporary basis where firms are struggling due to immediate loss of income due to Brexit,” it said.

Ibec said a no-deal outcome is now the most likely scenario in December which, it says, will fundamentally reframe the economic outlook for Ireland, especially the regions most reliant on Brexit-exposed sectors.

“Whilst some parts of the country may begin to recover from Covid-19 in 2021, others would be sent in a second recessionary spiral,” the report concludes. 

It said the measures it proposes can be paid for through the existing €4 billion in Brexit contingency funding set aside for the years 2020 to 2025, additional tariff revenue from UK imports, and funding from the EU Brexit adjustment fund.

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