Michael Ahern (Cork East, Fianna Fail)

I am pleased to have the opportunity to speak on the third budget of the Minister for Finance, Deputy Cowen. It is a well balanced budget, which includes significant increases in pensions and social welfare allowances and generous tax incentives. It also provides comprehensive measures to safeguard our environment and to ensure continuing economic growth. The budget is clearly sculpted to ensure an equitable distribution of the wealth created by workers in our economy. It will also ensure the economy does not overheat and that there is something left in the kitty should the economic environment deteriorate.

I wish to focus on the importance of small businesses to the economy. Each year, the global entrepreneurship monitor, GEM, benchmarks Ireland as one of the most entrepreneurial economies in Europe. Entrepreneurs and small and medium enterprises, SMEs, have emerged as the engine of economic and social development throughout the State. SMEs and the businessmen and businesswomen who establish and drive enterprise continue to play a central role in our economic miracle. These companies make invaluable contributions to many local economies, providing employment prospects where few existed and delivering new and innovative products to customers both at home and in overseas markets. Their ambition, creativity and the contribution they make to the lives of people throughout the State should not be underestimated.

Enterprise Ireland has primary responsibility for the development of indigenous SMEs in the manufacturing and internationally traded services sectors. It offers a range of supports aimed at assisting client companies to expand and compete in the international marketplace. Enterprise Ireland client companies, which are mainly indigenous SMEs, employ more than 140,000 people. They also invest a total of €17 billion annually in payroll, raw materials and services, thereby boosting their local economies.

Small firms face challenging new realities, not least the changing structure of the Irish enterprise base. Ten years ago, for example, exports of software by indigenous companies amounted to €57 million. Today, exports in this sector by Enterprise Ireland client companies amount to more than €1.3 billion. As a country with a relatively limited domestic market for both products and services, it is imperative that small Irish companies with ambitions to grow continue to seek opportunities in overseas markets.

Future economic success, both domestically and internationally, will be greatly influenced by several factors. Companies must be in a position to undertake sophisticated research, development and innovation, and they must be able to identify the training needs of staff. In its strategy, Transforming Irish Industry, Enterprise Ireland focused on how best to accelerate the development and internationalisation of Irish owned business as a priority for future economic development.

This budget represents a milestone in improving the environment for small business. It will further incentivise research and development and protect our competitiveness. The budget will provide a significant boost to the 250,000 small businesses operating in Ireland and the 800,000 people they employ. The measures announced will continue to support and develop the spirit of entrepreneurship.

I welcome the extension to 2013 and the radical enhancement of the business expansion and seed capital schemes at a cost of €25 million in a full year. The almost fivefold increase in the business expansion scheme investor limit to €150,000 and the doubling of the company limit to €2 million will significantly enhance the attractiveness of the scheme. These changes will tackle the difficulties faced by small businesses in raising capital to pursue entrepreneurial risk-taking. Fostering the growth of wealth-creating enterprises is of central importance if Ireland's economic success is to be sustained in the long term. These changes will incentivise people to invest in start-up companies rather than investing in property abroad.

I also welcome the increase in the VAT registration threshold to €70,000 for goods and €35,000 for services. Of benefit also will be the increase in the cash basis threshold to €1 million. These measures will greatly encourage early-stage entrepreneurial activity and will support small business development into the future. They will also greatly reduce compliance costs and remove 8,000 businesses from the VAT net. This is testament to the Government's commitment to reducing administrative burdens on business, particularly small businesses.

The trebling of the small business threshold for the payment of preliminary corporation tax from €50,000 to €150,000 is welcome, as are the provisions for new companies. This new simplified system will further ease the administrative and accounting burden for the 97% of companies to which it will apply. The substantial income tax relief package will further incentivise employment, reduce labour costs and reward workers. Ireland has the second lowest tax wedge in the OECD. The enhancements of the budget will further reduce the tax wedge and incentivise work. Ensuring those on the minimum wage stay out of the tax net will also assist those who are unemployed to transfer to the active labour market. The budget delivers for business, workers and sustainable prosperity.

I welcome the improvements to the research and development tax credit estimated at €70 million in a full year. The increase from three to six years for tax benefit for incremental research and development will not only enhance the value of the incentive but provide critical longer-term certainty for both indigenous and foreign direct investment companies, making key strategic decisions to invest in or locate research and development activities in Ireland. It sends a clear signal to business that the Government is supporting their efforts to develop new products and win new markets. The wealth created by these industries can then be redistributed to other areas of the economy such as the health services and social welfare.

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