Mr. Ian Talbot:

As Ireland's largest business network, Chambers Ireland is pleased to be given this opportunity to address the committee. Our submission represents the views of the entire chamber network. It is the result of extensive consultation with representatives of the business community throughout Ireland. Our members include established indigenous and multinational companies as well as small and medium-sized enterprises taking their first steps in business. All of them recognise the role governments can play in producing the right conditions for job creation and retention.

When this Government came to power, we noted the importance it attached to job creation. Policies that support existing positions and help to create new employment will be a cornerstone of any future economic recovery. Throughout 2012 we observed the progress made in this area and commented on the action plan for jobs and the three progress reports made to date. Our general view is that while the action plan is strong on aspiration, we urgently need to deliver more rapidly. While high profile jobs announcements are very welcome and we congratulate the Government on successes in this area, the numbers on the live register remain alarming.

The policies pursued must create sustainable employment at a cost that is capable of being borne by businesses. We believe this can be achieved through a number of policy areas. There must be no increase in the cost of employment, wage setting mechanisms must not be excessively rigid, local government reform must help local economies, there must be a range of practical supports for SMEs and entrepreneurs, Ireland's infrastructure must be strengthened, and any changes in taxation must be sympathetic to the needs of the business community.

Our members believe that the most important factor affecting job creation is the cost of employment. If the Government is serious about helping businesses to create jobs, they must not increase these costs. An example members may not think about is that the profitability of companies which cover health insurance costs for their staff is affected by ongoing levy increases, which have increased from €160 for each adult covered in 2009 to €285 in 2012. With further increases scheduled, this has a real impact on the ability of these companies to retain existing staff and create new employment. We believe there must not be any increase in the employer's share of PRSI and additional costs of sick leave must not be transferred to employers. The Minister for Social Protection has suggested that such moves would be justified as they merely bring Ireland into line with international norms. We reject that claim, however. A number of major OECD countries have similar sick leave regimes as in Ireland. Furthermore, employers bear the brunt of the cost of sick leave through their contributions to the Social Insurance Fund. The extraordinary rise in health insurance costs also adds to companies' cost burdens and is a matter of concern. These costs would not only harm existing indigenous companies but also have a harmful impact on foreign direct investment. Companies considering investments in Ireland will not like to see the cost of employment rising. The Minister's logic is flawed because the outcome of these policies would run counter to the Government's stated aims on job creation.

This August saw the enactment of the Industrial Relations (Amendment) Act. A number of changes were welcomed by Chambers Ireland and the wider business community. In particular, the reduction of Sunday premium rates of pay could prove vital in guaranteeing the survival of many small businesses in the retail and service sector. For job creation to be sustainable, conditions of employment must be flexible. Artificially inflated wage levels actually threaten jobs. Many EU countries are seeing the benefit of flexicurity in employment because flexible terms and conditions actually produce more secure and stable outcomes for employers and workers. Future legislation must be clear, simple and easily understood and implemented to ease the regulatory burden and make it easier for employers to comply with the current cornucopia of legislation in this area, which itself is a disincentive to employment creation. Approximately 35 Acts apply to employment. We reiterate our call for a fully consolidated single Act in this area.

Considerable attention has been given this year to the reform of local government. While the local government reform action plan mainly focused on the restructuring of local authorities, if the Government is intent on putting people first it needs to ensure local authorities work with local companies to assist in the task of job creation. The local enterprise offices, LEOs, which replace the county enterprise boards, should have clearly defined roles and functions and must not duplicate the services already offered by private companies.

Instead they should fill the gaps between existing services to ensure businesses are supported.

Furthermore, representatives of the local business community ought to be included on these bodies. For instance, given the experience of and local knowledge accumulated by chambers of commerce, representatives of such bodies could be an invaluable addition to any LEO. The Government must emphasise the importance of local tendering. Public sector organisations should be encouraged to tender from local firms and consortia. Specifically, Department of Finance circular 10/10 giving guidance on SME participation in tenders should be fully enforced.

I refer to supports for SMEs and entrepreneurs. This is another key area affecting job creation and availability and we have a number of proposals. First, the cashflow of SMEs can be improved by implementing the EU directive to allow them to utilise a cash accounting system for a greater cap. While the Revenue Commissioners have implemented a cash accounting scheme, allowing companies to account for VAT on sale on the basis of payments received rather than tax invoices issued, it requires that annual turnover of the business must not exceed €1 million. This threshold is low by international comparison, being approximately two thirds of the thresholds that apply under similar schemes in the UK and Australia. Where a VAT registered trader has an annual turnover exceeding €1 million, it can only apply the cash accounting scheme where its supplies goods or services almost exclusively to unregistered persons. This limits its application in practice to retailers and others businesses that sell to consumers and it does not assist the large number of SMEs with a turnover of marginally in excess of €1 million that carry out mainly business-to-business sales. We fully support recommendations regarding the extension of the scheme to businesses with a turnover of less than €2.5 million. The full year cost of this proposal is zero, as there is no reduction in VAT paid. It is simply a deferral while a number of companies adjust from one system to the other.

Businesses must be encouraged to use the services on offer from the microfinance fund and credit guarantee scheme. A perception persists that many businesses will be rejected when they apply for credit and we must challenge this. Businesses must be encouraged to apply to the banks, appeal through the CRO and use the credit schemes as a final resort. We have called for a credit guarantee scheme since 2009 and we are disappointed by the number of applications being made to the CRO but the fact that so few are going to the office tells us something about demand levels in small businesses. Our sense on the ground is that this is as much a demand issue as a supply issue. The schemes are a vital component in improving confidence and the key is to encourage companies to apply to their banks because there are still companies that are afraid to go in and ask. If any of these schemes give them a good reason to go in and ask, it is up to the bank then to keep them there. The key issue for us is that when the recovery starts in earnest, we need to make sure banks have plenty of money to lend as well.

The Government should take measures to reduce the level of black market activity in the economy. Legitimate businesses, which create numerous jobs, suffer as a consequence of these activities. We believe hundreds of millions of euro are at stake.

Entrepreneurs should be rewarded for their risk tacking activity through the introduction of entrepreneurs' relief. This would reduce the effective capital gains tax rate from 30% to 10% for qualifying disposals. This should apply to gains made on the disposal of entrepreneurial businesses by individuals following the sale of all or part of a business. We are looking for measures that will help entrepreneurs to start businesses and create jobs. The seed capital scheme should be simplified and promoted to encourage more people to start their own businesses and grow job opportunities in the future.

Infrastructure is another area that allows business to grow and develop and, subsequently, leads to job creation. The Government must invest in the development and maintenance of primary, secondary and tertiary roads across Ireland. One example of a project that could greatly assist Ireland's business community is to upgrade Newlands Cross to complete the upgrade to the N7, which began in the 1960s. Electronic infrastructure is also essential. Given Ireland's dispersed population, it is essential that all businesses benefit from a fast, efficient and reliable broadband service. The national broadband plan must be fully implemented.

As we approach the budget, taxation is not far from most people's thoughts. From a business perspective, corporation tax must remain at 12.5%. This will give businesses, internally and externally, the confidence to grow and develop, creating sustainable employment while allowing them to reinvest in their businesses. The new local tax ought to lead to an appropriately targeted reduction in rates and other charges paid for by local businesses. This again would give those in the business community increased confidence and security to enable them to expand. In recent years, the hospitality sector has benefitted from a 9% VAT rate. This should have a rolling two-year guarantee to enable businesses to guarantee advertised prices and accept bookings well in advance. Typically, that system works on a one to two year timeframe for bookings and a guaranteed rate would be valuable. This would safeguard many jobs in this vulnerable sector.

The solutions presented here seem straightforward and that is because we believe they are. A number of Ministers have repeated the mantra that while governments do not directly create jobs, they help produce the right conditions for job creation. To do that, practical measures must be introduced to support indigenous companies and encourage increased FDI. If the jobs action plan 2012 was strong on aspiration, any new document must deliver quantifiable results. I thank the committee for its interest in our position and for its attention today. We are willing to address any questions the members might have.