Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I have said on many occasions that small and medium enterprises, SMEs, are the lifeblood of our economy and play a crucial role in economic and employment growth. This Government has introduced a range of initiatives to support the SME sector to grow and create jobs.

Financing SME growth

The strategic banking corporation of Ireland, which is expected to be formally launched at the end of this month, will increase the availability of loans of longer duration, coupled with more flexible conditions and potentially at lower cost. Permanent TSB, which will shortly recommence actively lending to the SME sector, has agreed to participate in the Credit Review Office process and Ulster Bank is actively considering making a similar commitment. The seed capital scheme will be relaunched in the coming months. I am increasing the amount of finance that can be raised by a company under the employment and investment incentive to €5 million annually, subject to a lifetime maximum of €15 million. Investment in the management and operation of nursing homes, medium-sized enterprises in non-assisted areas and internationally traded financial services that are certified by Enterprise Ireland will now qualify under the scheme. I am increasing the required holding period for shares from three to four years and extending the inclusion of hotels, guest houses and self-catering accommodation in the scheme by a further three years. These changes are subject to the approval of the European Commission.

Export Support

To support SMEs to grow their businesses abroad, I am improving the foreign earnings deduction by extending the list of countries eligible to include Mexico, Chile and certain countries in the Middle East and Asia; reducing the number of days that employees are required to be abroad in a year to 40 days; and including travel time in order to make it easier for smaller companies to send employees on trade missions. My Department and the Department of Jobs, Enterprise and Innovation will roll out an integrated export finance strategy in 2015, with financing products and platforms being developed by the strategic banking corporation of Ireland and the Ireland Strategic Investment Fund in conjunction with Enterprise Ireland.

Income Tax Reform Plan

A fair, efficient and competitive income tax system is essential for economic growth and job creation. Income tax increases introduced between 2008 and 2011 mean that employees on the minimum wage are liable for the top rate of USC and workers on average incomes in Ireland face a marginal tax rate of 52% of their income when income tax, USC and PRSI are combined. Those who have lost their jobs have been hit hardest in recent years but working families have seen significant falls in both wages and take-home pay.

These outcomes impact on competitiveness, are negative for economic growth and act as a barrier to job creation. Reduced take home pay also directly affects consumer confidence and has serious consequences for businesses, especially retailers. We have all seen the impact of this in towns and villages throughout of the country.

In each of my previous three budgets, we have not increased income tax or USC rates, nor have we reduced credits or bands. In my first budget, I exempted 330,000 low income earners from the USC. The Government viewed this as the best possible approach to income tax policy for the early phase of our national recovery. As we enter a new phase in the recovery, the progress made during the past three years in improving public finances, increasing economic growth and creating jobs means the Government can focus on reforming the income tax system in a manner that positively contributes to and strengthens that recovery. These reforms will give confidence about the future and create the opportunity for businesses to grow again.

In the summer, the Government committed to delivering better living and working standards to our people. Developing a considered and focused tax reform plan that reduces the 52% marginal tax rate on low and middle income earners in a manner that maintains the highly progressive nature of the tax system is a key part of this commitment. This will be delivered over a number of budgets. Reform starts today by means of making it more attractive to return to work, to stay in work and to ensure that work rewards individuals adequately. My Department estimates that a consistent series of reforms, along the lines announced today, delivered over a three-year period, could boost employment levels by as much as 15,000 jobs when the full impact of the changes have taken effect in the economy.

To deliver on this plan, I am: increasing the entry point to the universal social charge to just above €12,000, removing 80,000 low income workers from the charge altogether-----

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