Mr. Fergal O'Brien:

I thank the Chairman and members of the committee for the invitation. I will make some brief introductory comments on what we see as the broad trends in the enterprise sector and the economy at the moment. My colleague, Mr. Brady, will address the specifics we have laid out in our submission. I share the view of previous speakers that while we have a very dynamic group of indigenous businesses that perform cutting-edge innovation across a range of sectors, applying world class technologies and in many cases performing very strongly on a global scale, we have no doubt that the SME and indigenous sector is not living up to its full potential. We identify a number of policy levers that could significantly improve the environment for SMEs in Ireland. I will comment on what we see as very significant trends in the Irish economy over the last half decade or so that I think will bring significant opportunity and challenge for the SME sector if we do not react in the right way from a policy perspective.

By far the most significant trend of the last half decade has been the hyper-globalisation of the Irish economy. This has brought incredible success in terms of employment in our multinational sector. We have seen the quality of multinational activity increase and strengthen significantly in terms of the nature of the roles, depth of innovation, and world-class quality of manufacturing that is happening here. Ireland is now one of the most open, globalised economies in the world. The multinational sector that is active in Ireland is performing at a level on a par with any other developed economy and in most cases beyond our competitors. Unfortunately, some of this success brings us very significant challenges. More than in any period in the last 15 years, we think the economy is now facing very significant risks. It is facing competitiveness risks from an internal policy perspective and, as has been mentioned, some very significant external risks.

Examining the manifestation of the success of the multinational sector, one of the clearest indicators we have is that our corporate tax revenue has more than doubled in the space of four years. This gives us a significant opportunity in terms of the resources at our disposal but it also brings us a risk if we do not apply those resources correctly. To date, the main focus of public policy has been to put that corporate tax bonanza into the day-to-day costs of running the country. That is adding to the cost base and competitiveness challenges of the SME sector. We urge the committee to examine the source of the revenue from which the Exchequer is now benefitting - more than €5 billion in four years - and to ask how we can use this really important source of business tax to better invest in the economy and make it more sustainable for all enterprises. The reality for the SME sector is that the cost of business is going up because of the wider success of our economy, whether through competition for labour, the cost of rent or the cost of business services in the economy. We are losing competitiveness very rapidly and right now we are not reinvesting the fruits of the success of the multinational sector. That €5 billion surge in corporate tax is not being invested back into infrastructure to create better business conditions for all businesses, back into an innovation environment or back into the skills that we so desperately need for this economy.

We are potentially at an inflection point for the economy. We have performed incredibly strongly over the last years. We have a risk around the imbalance we are seeing in this corporate tax surge and the implications for competitiveness elsewhere in the economy. If we reinvest the proceeds properly, we can really improve business conditions for SMEs. If we do not, we will accentuate and make worse the competitiveness challenge that the SME sector is already facing. My colleague, Mr. Brady, will outline some of our specific solutions for the SME sector.