Oireachtas Joint and Select Committees
Tuesday, 30 June 2026
Committee on Budgetary Oversight
Cost of Business Financing: Discussion
2:00 am
Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I ask everyone to turn off their mobile phone devices or put them on silent mode. Before we begin, I wish to explain some limitations to parliamentary privilege and the practice of the House as regards references witnesses may make to other persons in their evidence. Witnesses are protected by absolute privilege in respect of the presentations they make to the committee. This means they have an absolute defence against any defamatory action for anything they say at the meeting. However, witnesses are expected not to abuse this privilege and it is my duty as Chair to ensure this privilege is not abused. Therefore, if their statements are potentially defamatory in relation to identifiable persons or entities, they will be directed to discontinue their remarks. It is imperative they comply with any such direction.
I advise members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex to participate in public meetings. In this regard, I ask members participating via Microsoft Teams that, prior to making their contribution to the meeting, they confirm they are on the grounds of the Leinster House campus.
Members are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, I will direct them to discontinue their remarks. It is imperative they comply with any such direction.
Today marks the first of two engagements with a range of different groups around the cost of financing business in Ireland in advance of the upcoming budget 2027 with a focus on spending and taxation measures. I welcome a number of witnesses. From Enterprise Ireland, I welcome Mr. Paul McKeown, executive director; and Mr. Garrett Murray, divisional manager, investment solutions. From Chambers Ireland, I welcome Mr. Ian Talbot, chief executive; and Ms Aoife Quinn, policy and government affairs manager. From ISME, I welcome Mr. James Coghlan, former chair; and Ms Eilis Quinlan. The committee welcomes the opportunity to engage with them and I thank them for being here today.
I now invite the witnesses to make their opening statements.
Mr. Paul McKeown:
I thank the Cathaoirleach and the Deputies for the invitation to appear before the committee today. We welcome the opportunity to engage on measures to address the cost of financing business in Ireland in advance of budget 2027 with a focus on taxation and spending measures.
My name is Paul McKeown. I am an executive director for Enterprise Ireland, EI, with responsibility for finance and investment. I am joined by my colleague, Garrett Murray, who is divisional manager for investment solutions.
Enterprise Ireland supports Irish-owned enterprises to start, compete, scale, and succeed internationally, with a focus on accelerating sustainable business, exports and employment.
Our strategy, Delivering for Ireland, Leading Globally 2025–2029, is focused on strengthening the competitiveness of Irish-owned exporters as a driver of economic growth. It is built around four pillars - start, compete, scale and connect - with a strong emphasis on productivity, innovation, sustainability and global market diversification.
We support over 4,500 companies, employing more than 234,000 people. Notably, 69% of new jobs created in EI clients in 2025 were outside the Dublin region, demonstrating the role of our clients in balanced regional development.
EI works closely with regional stakeholders, including local authorities, seeking to support companies in regional locations. Our day-to-day working relationship with each of the 31 local enterprise offices is particularly important in their delivery of practical, solutions-focused supports to microenterprise across the country.
The operating environment for our clients has become increasingly complex due to increased global uncertainty, significant cost pressures, infrastructure capacity constraints, rapid advancements in artificial intelligence, AI, limited access to capital, increasing regulatory burdens, staffing challenges and the dual imperatives of decarbonisation and commercial innovation. In aggregate, these issues present a significant challenge for businesses in Ireland to remain internationally competitive, influencing key investment decisions and growth potential.
Rapid developments in technology, especially AI, is presenting both significant opportunities and challenges for our clients. Firms must invest in systems, skills and data capabilities to remain competitive and avail of these new opportunities. While these investments drive growth and productivity over time, they represent significant upfront costs, particularly for SMEs. In parallel, decarbonisation is becoming an increasingly important driver of business costs and investment decisions. Firms are required to invest in energy efficiency, low-carbon technologies, and more sustainable production processes to meet regulatory requirements and market expectations. While these investments are essential to Ireland's climate objectives and can deliver cost savings and other benefits over time, they involve significant upfront capital costs, particularly for energy intensive sectors and smaller firms. Supporting firms to manage this transition in a cost-effective manner will be critical to maintaining competitiveness.
Optimising infrastructure provision and a balanced, straightforward regulatory environment are prerequisites for the sustainable enterprise growth that will be critical to Ireland's future competitiveness. For example, the introduction and structure of water tariffs will be an important consideration for enterprise, with potential implications for cost competitiveness, particularly for water-intensive sectors. In parallel, challenges in the planning system are adding cost, uncertainty and risk, particularly where firms face delays in accessing key utilities and executing expansion plans. The Government's accelerating infrastructure action plan is welcome, and its timely and effective implementation will be important. It is also important that infrastructure investment is delivered in a way that supports competitiveness and avoids placing additional cost pressures on enterprise. More broadly, housing availability is now central to competitiveness and directly affects firms' ability to attract and retain talent.
Energy costs remain a significant driver of overall business costs with Economic and Social Research Institute, ESRI, analysis showing Ireland had some of the highest electricity prices in Europe over the 2018–2024 period. Notably, constraints in grid capacity and delays in network expansion have emerged as a growing challenge that increases connection costs and timelines for businesses while limiting the ability to fully exploit lower-cost renewable generation, thereby reinforcing upward pressure on electricity prices.
The cost and availability of finance is a key determinant of growth that has an impact on firms' ability to invest in innovation, digitalisation and decarbonisation. ESRI research highlights that structural features of the Irish credit market continue to result in relatively higher borrowing costs and more constrained access to finance for smaller firms, particularly compared with euro area peers. This underlines the need to increase competition in lending markets and expand alternative sources of finance, including non-bank and equity-based funding. Addressing gaps in the availability of scaling funding and risk capital remains critical to enabling high-growth firms to realise their full potential. If these market failures are not further alleviated, there is a risk to Ireland's medium- and long-term competitiveness and expansion of the indigenous exporting enterprise base.
Despite these challenges, overall enterprise performance and sentiment remain strong. Client companies continue to achieve productivity gains, alongside continued growth in exports and employment. This demonstrates a resilient enterprise base that is actively investing in competitiveness. A recent EI survey of almost 500 client companies from International Markets Week 2025 showed that 97% of Irish exporters expect to expand into new international markets, with firms actively pursuing diversification, innovation and digital adoption. However, growth opportunities and challenges vary significantly by sector, market and company size, reflecting differing demand conditions, cost structures, scale and exposure to global dynamics.
Taken together, these challenges highlight the need for a co-ordinated, system-wide response to strengthen competitiveness. Targeted taxation and public expenditure measures will play a key role in easing cost pressures, driving R&D expenditure, supporting investment, and improving access to finance, particularly for scaling and innovation-led firms. When assessing the competitiveness of the economy, it is also critical to benchmark performance against international trading partners in Europe and beyond, as relative cost levels, productivity and market conditions shape firms’ ability to compete globally.
Enterprise Ireland will continue to support the development of a more competitive, productive and resilient indigenous enterprise base. A key focus of our strategy is on scaling Irish enterprises, and this is where our programme activity is increasingly concentrated. Supporting firms to scale internationally is central to driving productivity, export growth and long-term economic impact. Through a combination of grant and equity supports, we are helping firms address the cost of doing business by improving access to finance, while also providing consultancy and programme supports that enhance operational efficiency.
Our clients would benefit from simplified and streamlined tax measures, reducing administrative burden to improve uptake by businesses and investors. Priorities would include better incentives for entrepreneurs and their investors to start and scale in Ireland, as well as including strengthening supports such as entrepreneur relief, unlocking greater private investment including reforms to capital gains tax to support startups, and scaling firms and finding new ways to mobilise domestic savings to drive long-term enterprise growth. Finally, strengthening innovation supports and R&D incentives is essential to increase investment in R&D, underpin productivity and global competitiveness.
Addressing the cost of doing business and the cost of financing requires a co-ordinated, whole-of-system approach. Enterprise Ireland continues to work with our clients, government and non-governmental stakeholders to support increasing competitiveness, resilience and a future focused and internationally competitive enterprise base with Irish exporters at the centre. I thank the committee. We look forward to members' questions.
Mr. Ian Talbot:
I thank the Cathaoirleach and members of the committee for the invitation to appear before the committee today with our priorities for budget 2027.
Chambers Ireland represents a network of 36 affiliated chambers nationwide that, in turn, represent 10,000 businesses. These range from startups, microenterprises and SMEs to large indigenous firms and multinationals.
We aim to take a whole-of-Ireland approach and represent the consensus of our network in our pre-budget submission.
Our message today is straightforward. We are calling for budget 2027 to tackle Ireland’s competitiveness gap. We urge the Government to prioritise spending and taxation measures that protect and promote business sustainability.
I am going to set out the priorities from our network. The first relates to the cost of doing business. Businesses are facing sustained increases in energy, labour, regulatory and operating costs, placing real pressure on our competitiveness. As a priority, budget 2027 should fund and implement the recommendations of the cost of business advisory forum, with clear ownership and public reporting on progress. It should also ease labour and compliance costs through double indexation of income tax bands, a temporary exemption from National Training Fund levy contributions until the surplus is actively deployed, and a programme to simplify business taxation and supports, including the R and D tax credit, the key employee engagement programme, KEEP, and the employment investment incentive scheme, EIIS.
Finally, the Government should support investment and productivity by increasing accelerated capital allowances for plant and machinery to 25%, reducing the capital gains tax rate, CGT, of 33% for non-passive investment, increasing the lifetime limit of €1.5 million in qualifying capital gains under entrepreneur's relief, and modernising enterprise support eligibility so that it better reflects turnover, value creation and economic impact. We need to encourage our risk takers.
These are practical steps that can ease cost and compliance pressure. It is not about one quick fix but requires immediate, medium-term and long-term action, with a focus on system-level simplification and consolidation.
The State must turn investment into visible results. The Government has committed significant public investment to a programme of energy, grid, water, wastewater and transport infrastructure over the coming years, but delivery remains too slow and inconsistent. The priority now is execution and accountability. This budget should ring-fence resources and introduce binding delivery targets under the accelerating infrastructure action plan, with public reporting every six months. It should support reform of judicial and planning delays, including progress on the civil reform Bill and stronger planning capacity across the system. It should also move infrastructure funding onto a multi-annual basis, particularly for water, transport and energy, so that delivery is planned, funded and managed over the long term.
Housing and infrastructure deficits are constant constraints on business expansion and regional development that require a step-change in ambition and delivery. Housing output must be scaled to more than 60,000 homes a year, using every available fiscal and policy tool. The Government should also expand strategic land banking and introduce compulsory sales orders to unlock development-ready land and bring stalled sites into productive use.
Without action on infrastructure, progress on competitiveness, labour supply and regional growth will continue to stall. Budget decisions must translate into delivery on the ground. It means faster and more predictable progress that can be scaled.
Climate and energy policy must move from ambition to delivery. Businesses support the green transition, but it must be practical and affordable. Energy security needs to be a fundamental priority for this Government, as security promises greater price stability and resilience against global shocks. Budget 2027 should prioritise the acceleration of wind energy deployment and designating offshore transmission as critical infrastructure. It means investing in grid capacity, storage and interconnection to reduce constraints and bring down energy costs. It also means introducing fast-track planning for on-site renewable energy so that businesses can reduce costs and play their part in the transition. At the same time, supports for decarbonisation must be scaled so that businesses can transition without undermining viability.
Faster policymaking and skills delivery are essential to keep pace with change. Economic and technological change, including AI and digital, is accelerating and current policy responses are too slow. The focus must be on unlocking capacity and being proactive, rather than reactive. To keep pace with change, budget 2027 must strengthen the resourcing of Departments, local authorities and public bodies so that decisions are faster, delivery is more predictable, and outdated processes no longer hold back investment. At an employer level, we recommend the creation of a SME skills fund to support the digital and green transitions. SMEs need practical AI adoption supports now. Workforce planning and apprenticeships must also be strengthened, with increased employer supports to build the critical skills pipelines that Ireland needs. This is essential to ensure that businesses can adapt, invest and remain competitive.
Budget 2027 must shift from ambition to delivery. We have the resources. The priority now is to reduce the cost of doing business, deliver infrastructure and housing at scale, make the climate and energy transition practical, and build the skills and systems needed for a fast-changing economy. If we get this right, we can restore business confidence and support sustainable growth across all regions.
Mr. James Coghlan:
Irish Small and Medium Employers, ISME, thanks the members of the committee for this invitation to appear before it. It has asked us to comment on measures to address the cost of financing business in Ireland in advance of budget 2027, with a focus on taxation and spending measures.
The first and most evident issue for Ireland is the absence of competition in the Irish market, which leaves no incentive for incumbents to compete on finance rates and no bargaining power among borrowers to seek lower rates. The absence of competition among our pillar banks means that peer to peer lenders, P2P, can secure lending with SMEs at rates of between 10% and 15%, and up to 17%. While this appears extortionate, SMEs appreciate the rapid decision-making ability of P2P lenders and the ability to repay early. There is also a structural problem with our pillar banks that the lending skill set they acquired pre-crash was based upon asset-backed lending with personal guarantees, while most SMEs today require working capital finance, a skill set that our pillar banks have not developed to the level required.
There is an evident trend among indigenous enterprises, including those we would expect to be expansionary at present, to shrink their balance sheets. This is evidenced by Central Bank figures, which we included in a table in our written submission and show outstanding credit balances for SMEs. This is a data set that we took from Central Statistics Office, CSO, data. It tells us that SME credit balances have fallen from €62 billion in 2011 to €30 billion in 2016 and €19 billion in 2020. The figure at the end of quarter 3 of 2025 was €16 billion. While GNI* and GDP have improved immeasurably over the same timescale, the numbers being loaned out have fallen. All major sectors of economic activity show a ten-year decline. Manufacturing, construction, wholesale-retail, hospitality, real estate, social services and social work have reduced over the last decade. If we look at the four years after September 2021, which was mid-pandemic, the figures are even more concerning: construction at -5%; wholesale-retail at -14%; hospitality at -37%; real estate at -19%; social-personal services at -26%; and health-social work at -44%. Overall, the figure is -14%. In contrast, GDP grew from €500 billion to €563 billion between 2021 and 2024, and GNI* grew from €230 billion to €321 billion, or 43%, in the same period. It is fair to say that SME balance sheets are not pacing national economic figures.
The Central Bank has given a number of technical reasons associated with the higher cost of debt in Ireland. These appear to be more focused on our elevated rates of loan delinquency and possibly the reluctance of our courts to permit adequate security over encumbered assets.
We have included links to other useful references in our submission, including a link to the Fitzgerald Power Funding Pulse quarterly report, which is a guide to the latest SME funding market trends and done in association with the Strategic Banking Corporation of Ireland, SBCI. There is some useful data in there. We have also included a link to ISME’s pre-budget submission, which includes a section on access to finance, and a link to our indigenous policy paper, which we issued in March 2026.
It is fair to say that, for the first time ever, ISME has published both an indigenous policy paper and a pre-budget submission, which are focused on one thing only – indigenous policy. There are some major problems that need to get fixed. We did not get involved in any other sideshows. This, for us, is the big thing. There are grave threats ahead. We need to expand our indigenous policy and futureproof the economy, and these will help to do that.
We have also included a link to a PwC indigenous scale-up report, which was published in June 2026. We were very pleased to see that it actually supported a lot of what we have been saying for a long time.
I am not going to mention the cost of business advisory forum. Our CEO is on that, and it is going to report shortly. We all know what is in there. I am not going to repeat all of the stuff around housing and infrastructure investment. The infrastructural task force has sat and reported, and work is afoot to make legislative changes in that regard.
As regards the competitiveness stuff and the Draghi report, I think that is all a given. It is notable that the Irish Government has set out its objectives for the European Presidency as, first, competitiveness, second, values and, third, defence. They are the three things it has chosen. We support all that, particularly where competitiveness is concerned.
We would be delighted to help with any questions.
Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I now open the discussion to the floor.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Cuirim fáilte roimh na finnéithe chuig an gcoiste. As a committee, we hear from others about the risk Ireland is exposed to from over-reliance on taxation from a few very successful companies in the multinational sector and, in a budgetary sense, how we are very exposed there. It is quite stark, especially what is being presented to us by ISME, in terms of the risks we have in not developing or supporting our indigenous sector strongly enough. That also creates further risk and exposure for us as a country. As a small, open economy, we are very exposed in the first instance, so those points are very important.
I have a few questions. To start with ISME, as regards the absence of competition in the Irish market in terms of lending for small businesses, the data ISME has presented in terms of the shrink in the balance sheets and the credit balances for SMEs is very stark. ISME rightly points out that in an expanding economy we should be going in the other direction. Enterprise Ireland in its opening statement talked about one of the potential alternatives to the pillar banks being an increase in non-bank finance and equity funding. What are the witnesses' views on challenges around accessing non-bank financing and equity funding? More generally, competition in the financial sector is coming in from neo-banks and it is at a personal level, but is there any indication or any evidence at all of any interest from neo-banks in supporting smaller enterprises?
Mr. James Coghlan:
Clearly, there is a lot of private equity funding going on as well in the country. There is no question about that. Those numbers do not show up in the Central Bank numbers. It would be useful to see what those numbers look like, but I am not aware what they are or what they look like in a global sense. I would like to see those numbers standing up against the Central Bank of Ireland numbers. If you talk to any small builder in any county, you will find that many of them are borrowing from those people. The Chair may correct me if I am wrong, but they are paying 9% to 15% or 16%, and there are entry costs and exit costs, which could be another 2% in and 2% out. Many of them are giving loans for a two-year period so they can charge the in-out fees again. Am I right?
Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Yes.
Mr. James Coghlan:
So you can borrow money from those markets but you are borrowing at a serious cost. The Government does not seem to be aware of this. We talk about housing and the impetus for housing development, but if you are a small builder in any given county and you are having to borrow money at 12%, pay 2% on the way in and 2% on the way out, or whatever the figure might be, and then pay the same again in two years' time, because no developer will close out a project in two years, it straight away begs a question. We are lending money to people for the wrong term. You have to match the funding with the asset or the length of time it takes to build out the asset. There is a serious problem there. We need to start looking at access to finance far more seriously.
The other thing is that people ask why SME owners are not borrowing money. It has to be said that, as regards risk, if you are trying to do a business case at the moment, anytime since Covid, for example, look at the cost structure in Ireland: labour up 35%, minimum wage up 35%, since 2022. I am not saying that is right or wrong; I am just saying it is a fact. If you cannot pass that on, that is a problem because it will eat your margin. Many SME owners are on single-digit net margins. They are not like multinationals on significant double-digit net margins. Material costs have gone through the roof. Look at property costs, rates and rents. Upward-only rents still exist. Look at energy costs and insurance costs. How do you plan a future with all those moving parts? Then you go to a bank and a pillar bank might be quite conservative, which they are, in their lending decision-making process. It is a difficult situation but something has to be done.
By the way, probably one of the SBCI's most popular funding methods for long-term, around seven-year, money was the growth and sustainability fund. It has had no money in that fund for 12 months. Since June of last year, it has had nothing. All the banks paused that particular fund last summer and there has been nothing since. That was a very helpful fund because it had relatively low-margin lending with competitive terms and conditions. Ms Quinlan served on the board of the SBCI until last summer, so if there are any further questions in that regard, she could probably deal with them. There is a serious problem out there.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Chambers Ireland is asking for simplification of business taxation and supports, including the research and development credit, KEEP and the EIIS. What is that simplification? What should it look like? What is Chambers Ireland calling for there? Simplification can mean lots of different things.
Mr. Ian Talbot:
Simplification is very easy to say and calls for regulations easy to make. There are things like the employer reporting regulations that were brought in a couple of years ago where companies have to outline line by line their expense payments before they can make expense payments to staff, for example. That is a reporting regulation that soaks up a lot of time in small businesses. Each individual sector has its own specific regulatory requirements. They differ across sectors, but a heck of a lot of forms need to be filled in by a heck of a lot of businesses.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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That is really about cutting the paperwork down to a much more manageable level.
Mr. Ian Talbot:
Yes, but we specifically mentioned things like KEEP, the EIIS and so on. Those are really important. One of the big issues we have in the Irish economy is that we have lots of start-ups that just do not scale. At some point, through complexity about getting finance, innovation, research and development or whatever, it is easier to sell up and move on than actually scale up. That is another big gap we have in the economy. We are looking at things like research and development, KEEP and the EIIS as opportunities to try to keep businesses incentivised and, as I mentioned in my speech, encourage the risk takers.
To the previous point about finance, there are macro things that are important as we look into the EU Presidency term. I refer to the Savings and Investments Union, the Capital Markets Union and the banking union. These are all things which are designed at EU level to try to bring more competition into the market and make more finance available, for example, to SMEs. The simplification agenda is around some of the tasks that need to be done but also, for example, some of the application processes to qualify for research and development expenditure and things like that. There is a lot in it, and you have to be in the business itself to know exactly what they are. It is hard to quantify.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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On infrastructure, the witnesses made points about strategic land banking, which we very much agree with. That needs to be scaled up. That would be a big help. Reference was made to compulsory sale orders and multi-annual funding. Those are very important points. How would binding delivery targets work? It sounds good, but who are we binding to delivery and how?
Mr. Ian Talbot:
It is very hard to make building happen. A key is the old phrase, "If you are not measuring, you can't improve". We talk a lot about regular reporting. We need open, regular, transparent reporting so we can see the progress and we can keep the pressure on in the right areas to make sure that progress is being made rather than every couple of years stepping back and saying, "We introduced an incentive and we thought it was working; actually it did not."
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The Government got rid of the annual housing targets, for example. Would Chambers Ireland like to see them brought back? Is that what-----
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The principle Mr. Talbot agrees with. Okay.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Mr. Talbot said "supports for decarbonisation must be scaled". Can he talk us through what that-----
Mr. Ian Talbot:
That is again back to having the finance available. We had the energy crisis, obviously, earlier this year. Hopefully, that is abated, but we do not know for sure what will happen. More and more businesses need to invest in solar and other decarbonisation efforts.
These things are getting cheaper over time but we still need the investment from organisations like the SEAI and so on to keep moving businesses forward, and information and finance. Some of it comes back to finance as well - to make sure there is finance available for companies to meet their targets as well.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I want to ask ISME about financing for smaller businesses. Are there two elements to it: additional funding for decarbonisation and skills in terms of technological conditions such as decarbonisation and then the general finance issue as well? Is it both of those or is it really the general finance issue?
Mr. James Coghlan:
I think it is a general finance issue but it is the whole ecosystem for enterprise. If the Deputy looks at our indigenous policy statement, for example, he will see there is a reference to Revenue's data on corporate taxation paid from 31 December 2023 for payments made in September 2024. That talks about 214,000 companies that paid corporation tax at that time. When we wrote the report that was the most recent data. Since then, Revenue produced 2024 data for corporation tax paid in September 2025. What is remarkable about that data, which partially answers the Deputy's question, is that the reference was to 214,000 companies. We must bear in mind that Enterprise Ireland has 4,500 clients and the IDA has less than 1,000, which is 5,000 companies that have a structured agency advocacy process, but what about the rest? Therein lies the difficulty. Some 57% of the 214,000 companies registered a tax loss – an average negative tax liability of -€13,000. The table gives all the data. It is in our indigenous policy. If we look at the next tranche up, it shows 32% paid corporation tax of less than €5,000. Some 89% are at cash flow break-even point, plus or minus. Some people would say that is a lack of productivity and productivity equals profit. Output less input equals profit equals productivity, but the reason there is a lack of productivity is that business costs are going through the roof. How do we invest when we are not making money? We are putting our SMEs in a really tricky place. Something has to be done. We have laid it out. Our solution is that maybe had we done what Italy did in 2016, which was a new SME-based industrial policy based on the everyday entrepreneur – not picking winners but, rather, just creating an ecosystem for all business and to let all boats rise to their level. They have done that and in ten years they have taken Italian exports from being the seventh highest in the OECD to being the fourth highest. We could have done that but we did not.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I thank Mr. Coghlan.
Edward Timmins (Wicklow, Fine Gael)
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I thank the witnesses for their statements. I worked in small business for pretty much all my life in the area of finance and I worked with an Enterprise Ireland-supported company for 20 years. I want to focus on a small point Mr. Coghlan touched on. Yesterday I met someone who has a small business, a restaurant. He showed me all the decarbonisation stuff he has done. He has timers on his cookers, screens and everything. I did not see the actual figures but he has the energy costs down to around 1% to 2%. He is trying to get that out there and he is struggling with supports from the LEO to broadcast what he has done. It was very impressive. I am going to dig deeper on it. There probably is room to add between 2% and 4% to the bottom line profit of small businesses if they focus more on that. Maybe there need to be better grants for small businesses. We are seeing increases for households. What are Mr. Coghlan's thoughts on the decarbonisation grant system? Could more be done to incentivise companies? This guy has proved it. I am going to dig a little bit more into it but from what I see at the outset there are serious cost savings to be made.
Mr. James Coghlan:
People will do all the obvious stuff. I have done it myself. What kind of food business is it? Is it a coffee shop that does a modest amount of kitchen activity? If it is a proper full-service restaurant you are going to be spending a whole lot more than 1% of your sales on energy costs. I would love to see those figures but I cannot accept it is as low as 1%. People will do what they can but there is a cost-of-living crisis. Ordinary families on average incomes are struggling. Their disposable income has been badly affected. It has been affected by rent, the housing market, food, childcare costs, insurance costs, fuel costs and energy costs. Disposable income is down. The business to consumer, B2C, economy is struggling. If your costs are going up and your revenues are coming down, that is a serious margin squeeze.
Edward Timmins (Wicklow, Fine Gael)
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I will go back to the debt. The figures are quite shocking, although the bulk of it is in real estate. There is a drop from €37 billion to €15 billion from September 2015 to September 2025. The bulk of that is real estate. The activity in real estate in 2015 was pretty low. I presume that is a lot of legacy debt. It would explain that the figure was so much higher back then at €18 billion versus €4 billion today.
Edward Timmins (Wicklow, Fine Gael)
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I know from experience how the pillar banks are so difficult to get borrowing from. Is the credit appeals mechanism much use at all?
Mr. James Coghlan:
I do not know. We all know the facility is there. I do not have any hard data but I would like to see some. To be fair, I have not looked to see if it is there or not. I do not know. I cannot comment. I know you can do it but I do not know whether it is being reported on by the banks or if it is required to be reported on by the Central Bank.
Edward Timmins (Wicklow, Fine Gael)
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I think there are figures published. This dovetails with Enterprise Ireland's whole idea. One of its main goals is targeting companies to scale. Do the witnesses have any suggestions as to how we can improve access to finance for small and medium companies so that they can scale? Clearly finance is the key to scaling, but at a reasonable cost, not the cost that was talked about for small developers that drive up housing costs.
Mr. Paul McKeown:
First, as we talked about earlier, both the availability of finance and at an appropriate price is important. That is within both the pillar banks and, as we alluded to, potentially broadening out the sources.
When we are looking at scaling we are looking at two things. The first is early-stage entrepreneurs setting up in terms of start-ups and finding how we back them and as they grow ensuring there is follow-on capital for them to meet that scaling. I might ask Mr. Murray to comment on what he is seeing in terms of the investment solutions side for both of those – the start-up side and the later stage.
Mr. Garrett Murray:
I will take the banking piece first. I draw the Deputy's attention to last week's ESRI report. It is very clear again. It is showing us that we are paying 1.5% higher than most of our European competitors. Formal loan rejections are down. There is a heavy reliance on trade credit, which is something to be quite concerned about. People are not borrowing to invest; they are using trade credit to maintain their current position. Overall, there is lower demand for bank credit.
We also know from the recently published SQW report by the Department of enterprise that there is a significant gap in terms of the equity availability required by start-up and scaling businesses. We work very hard to ensure there is venture capital in the market through leveraging the private sector, but there is a large gap in Ireland and that has to be recognised. That is where the tax piece comes in. What we are seeing is less angel investment. For us, there are a couple of things there. We believe the employment and investment incentive scheme, EIIS, needs to be reformed. It needs to not be a lifetime calculation; it should be per deal. We need to move to including preference shares, not ordinary shares, because that is the reality of the angel market at the moment. Companies that have early-stage investors do not put valuations on companies; it is done later on.
We also have to look at capital gains tax, CGT, in the wider context. We have a mandate around internationally traded manufacturing firms. We would have liked to see a lower rate of CGT for that. For investors, we would also like to see a lower rate of CGT where they reinvest that back into the productive side of the economy. I was with clients earlier this afternoon and one of them talked about the quilt of competitiveness. A plethora of different areas have to be dealt with both on the cost of business side and on the access to finance side.
However, we believe that there is a place for a significant increase in the availability of scaling capital. If we are serious about fulfilling Enterprise Ireland’s strategic objective, which is that Irish exporters would be the driver of the Irish economy, and if we continue doing what we are doing with the same behaviours, we are not going to have different outcomes.
Edward Timmins (Wicklow, Fine Gael)
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How do we change that? What do we need to do?
Mr. Garrett Murray:
We need to incentivise investment in the productive side of the economy, that is, encouraging angels. It is encouraging entrepreneurs to come back again. We have the entrepreneur relief at €1.5 million. That is a lifetime relief. What we want are entrepreneurs to come back. They may sell their business, which is not what Enterprise Ireland wants but that is a reality. However, they come back in and they do it again. We have a relief for entrepreneurs, which is lifetime based, not transaction based. If we think about people reinvesting in their companies and doing that, the EIIS from an angel perspective is critical.
When I come back to the comment around the ESRI research and what colleagues on the panel would refer to as the R and D tax credit, there is a huge amount to be done in terms of the compass that the Department of Finance has published. One example is the science test. To make it easy back in 2017, it was agreed that if the R and D that was being reviewed by Revenue was from an agency company of the IDA or Enterprise Ireland and it was under €50,000, it would not have to go through the science test. It would be a much simpler process. We have not increased that by any rate of inflation since. Therefore, if we were to increase that by the rate of inflation and put a premium on it, we would be talking about €120,000 or €150,000. That is an example of a small thing that is critical. For us, it is about manufacturing internationally traded services companies. If we want more angels in that market, we have to make the tax incentives more attractive because when we have a comparable situation where we are investing against asset-backed goods and asset-backed property, it is a far easier choice.
Lastly, the EIIS is critical. We had our investment committee this morning and four of the start-ups were up on EIIS. When we look at that, however, people only get the relief as an investor in the company if it is successful. They get no relief if the company fails. Start-ups fail, so if we are going to incentivise that investment, that is another behavioural change we would really like to see in the tax system. I hope that gives the Deputy-----
Edward Timmins (Wicklow, Fine Gael)
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That is very useful.
I will turn to Chambers Ireland for a second. I agree with its proposals 100%. On delivery, I know from working in business to working in politics that things move too slowly in politics. We all see that. By the way, on the housing targets, each county is now given housing targets. I have asked that they be monitored on a monthly basis with the senior planners, directors of services and county managers. What suggestions do the witnesses have? What is not being done to speed up delivery? Is there anything in particular? Targets are obviously one way. It was mentioned that if we could not measure it, we could not manage it. There are regular targets and reviews. Are there any other suggestions on how to speed it up?
Mr. Ian Talbot:
There are many things. As we know, there is no one solution to the housing crisis. We would have found it by now. There are issues around planning, the capacity of the building sector and financing, including financing of apartment blocks. There are also issues around people looking at areas in which they want to live. For example, have we got the visible public transport infrastructure that is going to get people to want to live in certain areas? There are many elements that are all interconnected and we have not been delivering any of them. If we look at the challenges in County Wicklow, the rail system makes getting around the Bray and Greystones area tricky. That is crying out for further investment to open up the whole south-east coast. The road infrastructure was modern for a while but now it is obviously very constrained. We just need more investment, more delivery and more urgency. Part of what we are trying to say is maybe-----
Edward Timmins (Wicklow, Fine Gael)
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We are all agreed on the problem and the solution, but executing the solution and making departments run better and quicker is the challenge.
Mr. Ian Talbot:
It is, and we would love to be able to drive the solution, but it is hard work. We will keep making noise and our chambers around the country will either replicate our submission or devise their own, or something in between, with more of their specific local issues, as the issues are different locally.
Edward Timmins (Wicklow, Fine Gael)
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I thank Mr. Talbot. I am conscious that my time is up. I will come back in again.
Joe Neville (Kildare North, Fine Gael)
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I thank the witnesses for coming in today. I have a few different questions. I might jump around a bit and ask short questions with short answers, if the witnesses can manage that, to try to maximise the time.
Does Enterprise Ireland find it has any difficulty with people getting into its system? Is it the case with Enterprise Ireland that once people are in, they are fine, but it is a bit like the health system where people might struggle to get into it in the first place?
Mr. Paul McKeown:
We work very closely with the local enterprise office, LEO, network on that aspect. We have a clear mandate in terms of what we work with. We work closely with the local enterprise offices on ensuring that, where there are companies that need to access EI services, there is a seamless transfer process. We have our regional network, which tries to work with companies to do that. If the Deputy is asking whether we ever get feedback, companies sometimes find it challenging at times. We get that feedback, and we try to make sure that it does not repeat. We assign client advisers across our client portfolios and client service is at the heart of what we are trying to do.
Joe Neville (Kildare North, Fine Gael)
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I will say that I have found Enterprise Ireland excellent to work with. I have worked with it as an adviser to companies. I have found it excellent but at the same time, I have been working directly in there. I was curious about whether Enterprise Ireland had ever had the other sort of feedback.
Joe Neville (Kildare North, Fine Gael)
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At a high level, I want to raise something that has popped up with Enterprise Ireland. I am sure ISME has raised it as well and is on top of it. I refer to the cost of borrowing. I am an accountant and have worked with companies, so I know how difficult it is, first of all, to get finance in Ireland and then, obviously, the cost of it. What role can the Government play in a direct, simple, easy, quick solution? There rarely is such for these sorts of issue, but what would that be at a really high level? Mr. Coghlan spoke about it. Does he want to jump in with what he recommends the Government could do?
Mr. James Coghlan:
In Germany, there is the Sparkasse banking model whereby if people go into any square of town in Germany, they are going to find them. They will find the church, the town hall and the Sparkasse bank. That is how it works. The local bank manager in the Sparkasse bank is obliged to know the owner of every business in his or her region.
Joe Neville (Kildare North, Fine Gael)
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Is that like a credit union?
Joe Neville (Kildare North, Fine Gael)
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Mr. Coghlan is talking about a radical change as opposed to-----
Joe Neville (Kildare North, Fine Gael)
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Is Mr. Coghlan talking about a State role in the banking sector?
Joe Neville (Kildare North, Fine Gael)
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Am I getting this right? It is very easy for all of us to come here and say that the cost of finance is too high or there is difficulty accessing it. We all know that. I would love to know the answer and am curious about this. The witnesses are experts in their fields. They are obviously at the top of their fields.
Mr. James Coghlan:
I will answer the question. We all know that the Government got out of AIB and Bank of Ireland very recently. Until it did that, it was hard to become a banker in this country. KBC left. Ulster Bank left. AIB and Bank of Ireland were here until the Government sold them as shareholdings. There was very little competition. To me, that should have sparked off of a movement towards bringing new capacity to this market. That did not happen. It has not happened yet.
Joe Neville (Kildare North, Fine Gael)
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Would Mr. Coghlan say that, since the crash, we have not had competition in the banking sector?
Joe Neville (Kildare North, Fine Gael)
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Yes, but what is the solution?
Joe Neville (Kildare North, Fine Gael)
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It is not easy. Once again, it is a bit like what somebody said about housing. I believe it was Mr. Talbot who said that, if there was a solution, we would be acting it out.
This is just something I was wondering and I will go back to Mr. McKeown. He has dealt with a lot of companies that have looked to exit. He referenced the €1.5 million lifetime threshold for entrepreneurs. What strikes me is that people can sell out a portion of a business. People can be entrepreneurs and sell off 30% to 40% of their business. Can they get a double use of that relief? Can they do it within a transaction yet keep a share of the company?
Joe Neville (Kildare North, Fine Gael)
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That is what I want to talk about. That is a gap I have seen. We are almost encouraging Irish entrepreneurs to exit businesses fully. For me, that is not good policy.
The problem is we are selling good Irish businesses to what are typically US companies that have the equity, or to private equity which is backed by foreign money, to come in and take out Irish companies. That is not something we should have in place. Does Mr. McKeown agree that it should be what might be described almost as multi-use? We should increase the limit and have multi-use of that limit within a context of a similar scale of investment.
Joe Neville (Kildare North, Fine Gael)
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I have worked in companies where people have been. We might note as a potential recommendation in our report on this that we look at the whole area of the €1.5 million threshold and how you can use it in a scale-up opportunity. I am curious to hear the views of all three witnesses on one thing that jumped out at me in my experience, which is companies that are in a position where they want to reward key staff, not just to keep them but so they can share in the benefits. Ultimately, it is not just one entrepreneur. He might have the idea, the funding or the scale up, but at the same time it is typically a team. Is the tax system set up to benefit this and are we doing it properly? From Mr. Talbot's perspective, does he feel we can benefit teams and key staff in companies? Is that coming up as an issue?
Mr. Ian Talbot:
It is not an area I am an expert in, but my sense is that share option schemes are not competitive here. There is a real danger that that ties in with something Deputy Timmins spoke about. The real concern, particularly with the manner in which AI investment is scaling up in America, is that if we do not keep our good technology people and good investors here with the right schemes, they are going to migrate, especially to America where the scale and finance is there to help them develop ideas. There is another old saying that things will never be as slow again as they are today. Things are getting quicker and quicker all the time. AI is escalating so fast. Look at the money that was raised for Space X three weeks ago. There are vast resources in America. Europe generally, and Ireland as part of that, is falling way behind. I go back to the bank argument. Look at the scale of the bank deposits in Ireland. They are €184 billion. It is enormous. It goes against banking theory where banks should be lending more than they are taking in deposits, whereas in Ireland it looks-----
Joe Neville (Kildare North, Fine Gael)
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Does Mr. Talbot still think they are crippled by what happened in the crash?
Joe Neville (Kildare North, Fine Gael)
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The savings investment scheme. It makes sense.
Ms Eilis Quinlan:
The EIIS scheme in particular is great for what it is, but it is risky. If you lose on an EIIS investment, you cannot use that loss and roll it forward against future gains. That is one thing I would certainly look at. The CGT rate itself is one of the highest across Europe at 33%. Even for dividends, if you are an SME that scales up and becomes profitable, if you take dividends out ,they are taxed at 55% rather than 33%. However, if you leave them in, there is a surcharge for a closed company. Any company owned by five owners or fewer is surcharged for keeping its profits. You cannot build up any lump sum to invest your profits in something because you will be surcharged on it.
Joe Neville (Kildare North, Fine Gael)
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I have used the EIIS and have seen it work successfully but it is a tricky and risky scheme.
Joe Neville (Kildare North, Fine Gael)
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It is very hard to access, and you need to have a big chunk of change in the first place to be willing. It is almost like going into a casino. If it works, it works, and if it does not, it does not. I thank the witnesses. I know we waded into tax elements but that is what my own experience has been too.
Richard O'Donoghue (Limerick County, Independent Ireland Party)
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We and the witnesses have mentioned all the issues with being in business and even living in this country. The criteria at the moment are that nothing is allowed for transition. We talk about decarbonisation. The way the model is set up in Ireland, nothing is allowed for the transition to decarbonisation. Look at the transport network at the moment. We saw the recent fuel protests when the fuel got scarce. The tax system is based on carbon tax. I said at the time they should have introduced a cap so they could take that tax up to a certain amount and after that you pay an increase in the cost of the fuel, but you do not pay a tax on the increase. That would have allowed for stabilisation so people could have forecast where their costs would be. It would have been halved at least because 50% of it was tax once you went over a certain amount. What you had then was a massive amount of inflation. When something gets inflated, it never gets deflated. I am in construction all my life. The witnesses mentioned risk takers and people taking a risk. What I am seeing in construction is that they are no longer taking risks in construction. People are coming in building a certain number of houses. They are taking minimum risk because they do not want to be left afterwards.
They also have a massive problem with infrastructure and the lack of it in this country. The format I had was that the people developing the houses should develop the infrastructure. When the infrastructure is developed by them, they can allow the Government to take it over afterwards for maintenance because Uisce Éireann-Irish Water, whatever you want to call it, cannot keep up with demand for infrastructure to build houses. We are also looking at the next generation trying to get on the housing ladder. In five years, we have seen the cost of a house increase €80 per square foot. The witnesses are correct that we have seen businesses in the single digits for profits. If they do not make profits they do not pay taxes. In any contract for even the bigger companies, they always had a build-in of 5% that the tariffs could move and things could change within your contract sequence. They are now putting 10% into contracts at the start. The 10% is not even holding. If you look at the markets, everything in the construction sector is PVC based, which is oil-based. That is windows, insulation and sewerage. Everything is oil-based in this country, but no one has allowed for the transition for things to be made better. When things are getting worse, they tax you more, which puts all the SME businesses under so much pressure that they cannot invest and keep going. You then look at the point of view of people who use their reserves, which they should be holding for their taxation and to meet their honourable taxation parts of it. They cannot get the different interventions because they are not tax compliant. They are using one stick on one side and one stick on the other and there is no forward thinking.
Start-up businesses were mentioned, and I encourage people to look at the theory of start-up businesses. Some start-up businesses last between two and three years. There are now businesses in trouble that have been there for decades and there is no investment to keep them going. They are constantly employing people. There is something there for new investment but there is nothing there for the ones in trouble at the moment to keep them afloat. Where we need to get back to is keeping things afloat. The only way you can keep things afloat for any business is to allow them to forecast, even if it is in between budgets. The same way as any business runs its forecasting for 12 months, the governance of this country does not allow for forecasting.
The cost of fuel affects everything from agriculture and industry to housing. Everything is based on fuel. Even if the Government introduced something like a capping system, whereby it would take its taxes and you would pay the increased cost after a cap is reached, at least you would be reducing your forecasting uncertainty by 50%.
I have listened to all the witnesses and they have all made fantastic points. What can we do for businesses, regardless of whether they are SMEs, small-town employers or other employers, to allow them to forecast for 12 months? What can we introduce that is like the budget, which forecasts for 12 months, from January to December, with December being the end of the tax year? How can we allow for stability so that we can improve business and encourage people in business?
Mr. James Coghlan:
It is a very difficult question. Recently, when we go to see Ministers or some others involved, they ask us what the top two or three things are. I do not think it is about the top two or three things; I think it is about an integrated approach to solving problems, because there is no simple solution. We have listed seven approaches in our document, the first being to develop a tax system that encourages scale-up – not scale-up for certain sectors but scale-up for everyone.
Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Everyone.
Mr. James Coghlan:
The others are to ensure a competitive indigenous enterprise base rather than seeking to develop individual champions; to provide businesses with ready and affordable access to capital; to provide an education system that addresses the educational underperformance of adults and our deficits in lifelong learning and the apprenticeship system; to ensure Ireland's foreign direct investment policy attracts businesses that have positive spillovers for indigenous enterprise; and to ensure objective-oriented enterprise policy drives tax policy, not the other way around. Who is in charge of our enterprise policy? It is the Government. The tax policies we have are being led by the Department of Finance. They should be led by the Department of Finance and the Department of enterprise jointly. In America, the CEOs are not the accountants. They are the engineers and are close to the customer and the product. They are the sales guys. We are missing something in this regard. It should not be up to the Department of Finance to determine tax policy on its own.
The final aspect is wrapping all of these objectives into a coherent enterprise strategy, like Italy's Industria 4.0 strategy. It has had tremendous success and it is all to do with SMEs. No big companies are involved, just SMEs. We should just copy it – copy and paste. That is what we are asking the members to do.
Mr. Ian Talbot:
I thank the Cathaoirleach. It is quite a question he has put out there for us all right. It struck me that the companies might be paying corporation tax but they are paying a heck of a lot of PAYE, PRSI and other taxes as well. Typically, the owner is the last person to get paid, if at all. That goes back to the risk taker and the need to reward risk.
Every time there is a crisis, we realise that there are other things we are dependent on in terms of oil derivatives that we did not realise. At a simplistic level, we thought it was about fuelling our cars or trucks. Now, as the Cathaoirleach implied, oil derivatives are in so many products and are needed in so many places. That is a real surprise and a real challenge for us as we look at the decarbonisation agenda and at substitution. The big areas of substitution involve the oil for home heating or people's cars. We are still not addressing how we are going to deal with all of our paints, polystyrene and all the incredible products oil is used for these days. I do not think people are thinking about that. We still need to think about the big issues and the big emitters. The big drivers of cost in this country are transport and home heating.
Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Which goes back to fuel.
Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Consider the average age of transport vehicles, even those of Bus Éireann. Around Dublin, the buses are 20 years old. The bus companies cannot keep up with the market and they are Government funded. Regarding enterprise, we should consider the average age of the trucks that go up and down the motorways. With regard to transition, if there is too much excise people cannot reinvest in better vehicles, which are more economical, or even electric vehicles where they work. They cannot invest because they are so far behind in paying taxes on fuel and trying to keep their existing vehicles going that they cannot get to the next level. That means that every business, including international businesses in this country, which I encourage, has employees going back to it saying they want more money because they cannot afford to go to work because of transport costs. It is costing more for food, clothes and childcare. It is all coming back to the same people all the time. It requires a joined-up approach.
What can we put in the system that will cover for all? To answer this, I went back to the idea of a cap on fuel tax. You would pay the increased cost when the cap has been exceeded. This means that if there is a shortage of fuel, you know you will be taxed only up to a certain level and that you will have to pay the increased amount after that. If this had been introduced when the protests were taking place, it might have had an impact. Targeted measures were brought in. They were targeted at those in the Irish Road Haulage Association, which accounts for only 17% of the transport network in this country. The measures did not cover people in the same business who were drawing their own goods. If they employed somebody in transport who could draw for them, they got compensated, but if they did it themselves they did not. It goes back to the point that there should be something across the board for everyone to create a level playing field. It would remove the gouging. If you have a cap on something, you can actually see where there is gouging beyond it.
There are people in the markets who held large quantities of materials from this country and who were the biggest holders of materials in the country. They stockpiled, waiting for the price fluctuations to go, and then sold the same products, which they actually got in at a lower price, doubling and tripling their money.
Putting caps in certain areas would work. I believe in targeting in certain areas, but I also believe in a level playing field that would encourage businesses, encourage people to live and encourage people to spend. It would also encourage people to take more risk, which would yield more tax, which makes the wheels go around.
Edward Timmins (Wicklow, Fine Gael)
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I want to come back in on something Mr. Coghlan said. I cannot agree with what he said about about the Department of Finance driving the policy. For example, the enhanced reporting requirement is a really bureaucratic environment for small companies. Every time you pay someone a mileage expense, you have to return it that day. You cannot even wait until the end of the month. That cannot be designed by someone who has any consciousness of how business is run. Capital gains tax, which I harp on about it all the time, is not indexed. Twenty-five years ago, it used to be indexed. There is a culture in the Department of Finance and in the Revenue Commissioners that is effectively not taking account of the implications of their decisions for businesses. Apart from the fact that I would call it a dishonest stealth tax on an annual basis in respect of CGT, what are the witnesses' thoughts on that?
Mr. James Coghlan:
Obviously, the Department of Finance has competency in anything to do with finance, but the Department of enterprise has competency in coming up with a suite of measures that are motivational for businesses – all businesses, including big, medium-sized, small and micro businesses. No disrespect to Enterprise Ireland, which is doing great work, but it has only 5,000 clients. IDA Ireland has 1,000 clients. There are many more companies in Ireland than there are clients. We need policy which is a match-up for everybody. The Department of Finance needs to work with its colleagues in the Department of enterprise to come up with an agreed strategy that works for everybody, not just some.
There are examples. If you look at our pre-budget submission, you will see there are three or four pages of recommendations in respect of all the tax reliefs. Some of those tax reliefs in their current form are used only 30 or 40 times a year. Why do they exist? Who designed them? For what purpose? Surely they were designed to succeed, not to fail. Surely that was the case.
Edward Timmins (Wicklow, Fine Gael)
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Does the Government then need to do a lot more?
Mr. James Coghlan:
There needs to be a complete revision. To look at the history, if you go back to the early eighties, you had the Culliton report and the Telesis report. In 2004, you had the O'Driscoll report. That is the last time we had an independent review of our industrial policy. That was 24 years ago. We used to do it every ten years. Why have we not done it since? I am talking about an independent review. We have done lots of internal reviews but we need an independent review.
Edward Timmins (Wicklow, Fine Gael)
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To go back to the finance for a minute, invoice discounting is obviously very helpful. Mr. Coghlan briefly mentioned trade finance. I presume that is what he was talking about. In my experience, invoice discounting is a very useful tool for growing slowly. It is cheap and it does not involve personal guarantees. I could ask this question of everyone but I will start by asking Mr. Coghlan what role he sees that having. I have always found it a very helpful form of finance for small and medium companies.
Ms Eilis Quinlan:
The problem I have seen with companies that have used invoice discounting over the years is what happens when they try to get out. It is very expensive to get out. At the beginning, you are selling your debts. You are getting cash flow at the start, which is great, but, when it all rolls through, you have to finance your debtors again to get out. It is also very-----
Edward Timmins (Wicklow, Fine Gael)
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Why would you want to get out, however?
Edward Timmins (Wicklow, Fine Gael)
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My experience was a little bit better than that. The finance went pretty well, although obviously not over 90 days. It actually worked, however.
Edward Timmins (Wicklow, Fine Gael)
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That is up to 90 days. Once it is over 90 days old, it is excluded. There can be certain credit limits on certain clients. There might be restrictions built around a percentage of the total book. I accept that.
Ms Eilis Quinlan:
The funding ran out. One of the original schemes, the future growth loan scheme, was to run over ten years. The funding could not be kept in the banks. It was all drawn down within ten days. A couple of years later, a similar scheme was devised that was to run over seven years. That was the longest term. That is very important because, if you look at the monthly repayments on a short-term loan, you will see that they are massive.
Edward Timmins (Wicklow, Fine Gael)
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Is Ms Quinlan suggesting that should be reintroduced?
Edward Timmins (Wicklow, Fine Gael)
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Is it that the Government is not backing the funding?
Mr. Ian Talbot:
It might be similar to the argument made about the National Training Fund. That fund is subject to a departmental cap. We cannot spend any more because the departmental expenditure is capped. We know there is a pool of money there but we cannot access it because of separate rules. Perhaps, it is something like that. It may be that the money cannot be freed up because it is being used elsewhere under a departmental spending cap.
Mr. Ian Talbot:
Yes, but there is still a contribution from the Department of Finance. I am just saying that may be the case. It is definitely an issue with the National Training Fund. The Department of Further and Higher Education, Research, Innovation and Science is saying that there is a limit on how much it can spend and that it cannot spend more than a given amount from the NTF because that would breach the departmental limit. That is the way it is.
Edward Timmins (Wicklow, Fine Gael)
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Something else I have heard in feedback from really small companies, companies with fewer than ten employees, is that the local enterprise office application form is very cumbersome. I cannot say I have had that problem with Enterprise Ireland. I have found it quite user-friendly. Do the witnesses have any comment on that? The application form for funding from local enterprise offices is very long. Given the size of the companies that are applying, it is just extra work for them.
Mr. Paul McKeown:
Our centre of excellence is working with the LEOs on that. It is part of a simplification agenda that is under way. It is working on the feedback it has received. There is a constant drive to make it simpler for companies to apply. That involves both standardisation and simplification. It is absolutely on the agenda.
Edward Timmins (Wicklow, Fine Gael)
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I have one last question. Should the Government do more to promote decarbonisation in small companies?
Edward Timmins (Wicklow, Fine Gael)
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Of course it is but how should that be done?
Mr. Ian Talbot:
The SEAI has significantly improved the work it is doing but there is always more you can do. I was looking at this earlier. Some of this comes down to SMEs actually having the time. They are so busy keeping the boat afloat that they do not have time to look at the opportunities. There are then the stories, such as the story the Deputy told us earlier about the company he looked it. Getting those stories out there is important. The final thing relates to opportunities for training and letting people know what is available. That comes back to the NTF. There is loads of money lying in the NTF but we cannot get at it.
Mr. James Coghlan:
I will go back to what Ms Quinlan was saying about the SBCI and the growth and sustainability fund, the more recent large tranche. There is a green transition fund and other asset finance measures as well. The growth and sustainability fund does what it says on the tin. You can make a loan application that is partially for capital expenditure and partly for a sustainability project. That money is no longer available. It has not been for 12 months. If this committee was to do one thing, it should go the Department of Finance and anyone else involved in that decision-making process and ask them why funding has not been available for the last 12 months.
Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I have been looking into this myself. Deputy Timmins mentioned the grants. The grants have improved. Mr. Talbot is 100% correct on that. Where people wanted to do a job on their house or business but could not afford to do it, it was a case of all or nothing. They are now allowed to do it in pieces. They can do a piece this year and another piece next year. That is common sense. It allows the improvements to be made affordably.
I am 100% in agreement with Mr. Coghlan. The Departments of Finance and enterprise have to come together. One of the reasons this committee was set up was to oversee the budget. Over the last couple of meetings, we have had witnesses like our witnesses today, people who have massive knowledge but who also take a commonsense approach to doing things. I am 100% in favour of an independent review. Doing the same thing over and over again expecting a different result is a sign of madness. It is not working. Based on the experience of the different stakeholders, it seems the Departments of Finance and enterprise need to make sure there is something there for everybody. This meeting has been very informative. The more we get into it, the more we see that businesses and households, regardless of their level, are facing the same troubles, albeit on different scales. Unless we find something that gives a piece to everybody across the board, we are not going to solve anything. Things will always throw themselves up but the systems that are in place at the moment are outdated and not working. All they are doing is causing undue pain to people and businesses that are trying to survive.
At the end of the day, something has to give. I would hate to see 2008 come back round again where we end up being economically not viable in this country like where we found ourselves in the crash. When I go back to the decarbonisation, I look at transition and at other international companies that are looking for the same business Ireland is looking for internationally. They do not have half the amount of regulations in place for them from the point of view of decarbonisation as those being put on this small nation. That is where I would like to see the transition to give us a level playing field from the point of view of exports. We saw what happened with Brazil and the Brazilian beef that was coming into the country. There was no regulation whatsoever but they were going to flood our market with an inferior product. If we look at the market here from the point of view of agriculture and where the regulation is, the reason we are known as having the best beef and the best dairy in the world is because of the way it is regulated. Allowing other countries to come in with lower standards when we have to try to keep our businesses going, however, is not an even playing field.
This has been a very informative meeting. In the time that is left, I will give each witness an opportunity to say something he or she would like to suggest or to mention one thing he or she thinks could be introduced that would help the process and give everyone in this country a chance. We can start with Ms Quinlan, if there is something she would like to see.
Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Like an apple; one bite at a time.
Mr. James Coghlan:
I echo that view. If I go back to what I said at the start, ISME deliberately this year did not come up with a panacea-type pre-budget submission. We came up with a pre-budget submission that is a mirror image of the indigenous policy we wrote and published in March of this year and presented to the Minister for enterprise. It has got to be all about indigenous at this stage. We know the concentration risk of attaching to the multinational community. We have to apply new thinking to how we do business.
Ms Aoife Quinn:
One thing we would like to see, which has been touched on briefly by other speakers, is around the cost of business advisory forum report. We fed into that, as has everyone around the table, but we would like to see an implementation plan, along with defined funding to attribute clear ownership and ensure there is regular reporting requirements. We would like to see recommendations within that enacted and acted on with funding from budget 2027.
Mr. Ian Talbot:
I would like to add to that the issue of speed of delivery across the board. We are just too slow. Things like the Dublin Airport cap where everyone concluded months and months ago that we needed to eliminate the cap but we are still here and still reading reports about American Airlines threatening slots and it still has not happened. We need to deliver on things. The cost of business advisory forum's final report is done but it needs to be funded and needs to be delivered. Mr. Coghlan mentioned the Letta and Draghi reports. They are two or three years old now. It is too slow. We do not have that time any more. We are asking that people realise the speed at which things are happening around them. It is scary.
Mr. Paul McKeown:
We have touched on a lot of things. Picking one principle and touching on the forecasting that was talked about, in uncertain times, the more that, as a system, we can ensure we are minimising that level of uncertainty and the more certainty we can bring to things is important as a principle. In terms of one tangible thing, we touched on entrepreneurial relief earlier and around allowing entrepreneurs to go again and moving from that lifetime limit. That would be a huge change because we have some outstanding entrepreneurs in the country who have had great success and would be willing to go again. We need to encourage and incentivise that to happen. There are great businesses there to be founded again if we do let that happen.
Mr. Garrett Murray:
One area we have not touched on, which is particularly important if we look at everything through the lens of international competitiveness, is to ask what does an SME in Ireland have or not have that their comparators have in Europe? Export credit insurance is absolutely critical. We do not have a State-backed scheme. Last time we looked at this there were two other countries in the European Union that did not have a State-backed scheme. That puts us very much in the minority. It is an area of policy that has been bounced around over many years. We have been asked to look at it by the Department of foreign affairs and the Department of enterprise following the diversification strategy after tariffs. It is something we will be doing but is something I ask the committee to be cognizant of as we go forward.
Richard O'Donoghue (Limerick County, Independent Ireland Party)
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That brings our meeting to a conclusion. I want to thank Mr. Paul McKeown and Mr. Garrett Murray from Enterprise Ireland for their contributions. From Chambers Ireland, I also thank Mr. Ian Talbot and Ms Aoife Quinn for their contributions. From ISME, I thank Mr. James Coghlan and Ms Eilis Quinlan for their contributions today. That concludes our session. I thank you all for attending this meeting. The meeting now stands adjourned until 3.30 p.m. on Tuesday 7 July 2026.