Mr. Ian Talbot:

I thank the Chairman. Ms Freeman has just recently joined the organisation and is still coming to terms with the volume of paperwork, so I will do most of the talking. I thank the committee for inviting us here today and for taking the time to look at these very important matters.

As the committee members will know, Chambers Ireland is the largest business organisation in the State. With over 45 member chambers in our network, we represent businesses in every region and economic sector in Ireland. We are very much generalist and represent all types of business without breaking them down into specific sub-sectors. This geographic representation gives us a unique understanding of the challenges facing businesses throughout Ireland. In particular, we know and understand the threats to those doing business and providing much-needed jobs in towns and villages. We also understand the opportunities and believe Government can play a major role in minimising the threats and turning the opportunities into realities.

Moving straight on to the first area we were asked to address, the 9% rate of VAT in the hospitality sector has contributed significantly to the growth of tourism and jobs in the last few years. Tourists are also arriving from increasingly diversified markets. We welcome recent announcements about new direct air links and affordable fares, which will undoubtedly contribute to this area. However, in spite of 4.2% growth in arrivals in the first six months of 2017, there was a concerning fall of 6.4% in visitor numbers from Great Britain during that period. The tourism and hospitality sector has particular regional importance, providing much-needed employment in rural Ireland and Border areas. The fall in tourist numbers from Great Britain was predicted following Brexit. The fall in the value of sterling has made Ireland less attractive financially while also potentially improving the competitiveness of UK tourist offerings for Irish and other eurozone visitors. There is also a competitiveness aspect this debate. Some 17 out of 19 eurozone countries have tourism VAT rates of 10% or less, making our current rate competitive against that cohort. Taking those matters into consideration, together with the uncertainty surrounding the nature of and timeframes for Brexit, we believe that the 9% VAT rate should remain in place. To increase it to our standard rate of 13.5% would be detrimental to the sector.

On the vacant site levy and local property tax, Chambers Ireland has long called for a broad-based system of property taxation. The chief attributes required for such a system to be acceptable would include a local tax to fund local services and local development needs; fairly applied taxation, in that everyone should contribute something; taxation that is structured to broaden the revenue base of local government leading, in turn, to a reduction in the pressure on the business community via rates and other charges; and that the tax should be equitable. Having established the local property tax and a high compliance ratio, we are concerned that the objectives above are being watered down with property values still locked at 2013 levels and many exemptions now in place.

We appreciate the difficulties significant increases in house prices cause when computing liabilities. However the bands and rates of taxation applied could, for example, be adapted. In addition, local authorities have flexibility to vary LPT payable through the local adjustment factor by an amount of plus or minus 15%. While it falls within the remit of local councils to determine the use of this factor, there is an opportunity for appropriate use of this flexibility to raise funds for local services and development which otherwise could not be delivered or would have to be funded by increases in business rates. We have called on councils to assess the opportunity in each of their areas to raise additional funds. In the long term, Government should consider the development of a land tax that is based on the value of a parcel of land as a replacement for LPT. As the value of a piece of land increases, the rate of tax increases. Such an approach to land management would encourage improved use of land and not penalise improvements in the way LPT does. With regard to the vacant site levy which is due to be levied from January 2019, we have recommended that it be brought forward to January 2018 as one of several measures that could be employed to encourage housing development.

Turning to our pre-budget submission, we conducted an extensive consultation process with our network about the concerns of the business community, feedback from which forms the basis of our submission. We recognise that there is limited fiscal space and we strongly encourage Government to continue to urge the EU to review and update the fiscal space calculations to reflect economic circumstances, the nature of investments proposed and relative borrowing costs.

There has been a very strong message from our network that investment in infrastructure needs to be the absolute priority in budget 2018 with a preference that other matters such as small business focus and tax reform are addressed by making commitments under the multi-annual framework model for future budgets. A significant component of the rationale for this was the importance of maximising our competitiveness in light of Brexit uncertainty. Our submission is fully laid out on our website.

The key elements are in three separate areas: infrastructure, small business focus and tax reform. The feedback was that investment in infrastructure should take precedence. The Minister, Deputy Donohoe's commitment to an additional €4.1 billion in capital spending between 2018 and 2021 is welcome as is the commitment to link capital plans to the national planning framework, NPF. We believe the NPF is hugely important.

One of the key areas we need that investment to target is housing. Our current issues in housing are a huge threat to Ireland’s competitiveness. We welcome the attention it is receiving but it is vitally important to implement the latest plans with a huge sense of urgency. Transport is a crucial area for investment. Greater connectivity between our regions and improving inter-city transport should be prioritised. The Government must deliver the national planning framework, the next draft of which is due at the end of September, and we need to ensure that spending on infrastructure ties in strategically with that. A recent Indecon Cork and Limerick Chambers research report found an M20 motorway would create over 5,000 jobs, help create a seamless Atlantic corridor and enable much greater connectivity between the regions. Our ports infrastructure and connectivity to those ports also needs to be upgraded particularly to help open up more direct access to EU markets in light of Brexit.

It is essential to roll out the national broadband plan as soon as possible. Businesses cannot function without quality high speed broadband. It affects a company’s ability to do business, hampers access to new markets and renders it increasingly difficult to do business with the Government, for example, applying for Government tenders, dealing with Revenue and filing annual returns with the Companies Registration Office. Download and upload speeds also need to be future-proofed to ensure competitiveness with other jurisdictions.

In the area of energy, our priority is ensuring a dependable and sustainable supply. We also have to be ready for a welcome increase in population of 1 million people over the next 25 years as the CSO has predicted. We need to prioritise continual investment in our grid infrastructure and address climate change issues. We have more detailed information in our full pre-budget submission. We need to know how it is proposed to fund a sustainable water supply across the country from general taxation, to ensure reliable funding and to open up the opportunity to raise external funding for vital projects.

In the area of education, Ireland continues to have the youngest population in Europe with one-third of the population under the age of 25. We must aspire to be the best there is with a best practice education system encompassing everything from early child care to college education and beyond. In the area of adult education and upskilling in business, with unemployment heading for 6% and below, which is a great story, there is a need to reallocate funding from unemployment programmes to schemes specifically geared at upskilling those already in employment. This will increase our competitive capability internationally and augment the ability of existing businesses to grow.

We need to continue investment in accessible, affordable, high quality child care services and to meet our commitments outlined in the national women’s strategy.

I will now turn to the other two sections. Recognising that we would like to see the concept of the multi-annual framework model being used here and limiting the surprises in a budget, the small business focus should continue to be the retention of the 9% VAT rate, the implementation of an employee share ownership scheme tailored to the needs of SMEs and establishing grant support for SMEs undertaking innovative research and development. In addition, there should be Brexit supports including financial commitment to back up announced proposals to expand our networks overseas and additional supports for a wide range of businesses to expand our export horizons with the necessary training and skills.

On tax reform, we need to reduce the marginal rate of tax below 50%. We need a competitive capital gains tax regime with the UK. We need to continue commitments we have made in the past to supporting the self-employed, entrepreneurs and small businesses in areas such as the USC surcharge, income tax credit, parity for the self-employed in maternity and paternity benefits and a tax credit on employers PRSI for micro-enterprises

We greatly welcome the committee’s interest in these areas and are happy to respond to its questions.