Niall Collins (Limerick County, Fianna Fail) | Oireachtas source

Fianna Fáil supports the general principles of the Companies (Accounting) Bill 2016, which implements a 2013 EU directive. My party will support the passage of this Bill through Second Stage and looks forward to strengthening its provisions on Committee Stage.

That will address some issues highlighted by practitioners in the current context and make legislation fit for purpose for small enterprises and microenterprises. The EU accounting directive will be of benefit to Irish small and medium enterprises, SMEs because it simplifies financial reporting requirements and reduces the administrative burden and compliance cost on such companies.

Ireland's economy is grounded on small and medium sized indigenous businesses. The health of the sector is vital to that of the overall economy. Every additional job created by a SME results in an immediate gain for the State as there is one less person on social welfare and one more person contributing through taxation. Micro, small and medium enterprises account for 99.7% of all business enterprises in this country. SMEs are the backbone of the domestic economy with 829,045 people employed in approximately 185,000 active enterprises. The Companies (Accounting) Bill 2016 sets out new criteria for companies to qualify as small, medium or large and introduces a new category of company, namely, microenterprises. Significantly, 91% of all SMEs are microenterprises. They are enterprises containing fewer than ten employees.

I welcome the provisions in the directive that will be transposed into Irish legislation. It is, however, a damming indictment of successive Fine Gael-led Governments that the Bill was published in August, more than three years after the EU accounting directive was finalised during Ireland’s EU Presidency in 2013. In addition, Ireland has missed the transposition deadline of 20 July 2015.

The raising of the thresholds for small companies to the EU maximum levels of turnover not exceeding €12 million and balance sheet total not exceeding €6 million is a welcome measure for Irish SMEs. The introduction of a small and micro-companies regime will enable such companies to adapt financial reporting standards applicable in the UK, if they wish to do so. The Bill also contains remedies to anomalies arising from the 2014 Companies Act, which is also welcome.

Small and micro-companies will be allowed to file abridged financial statements with the Companies Registration Office. However, it is quite extraordinary that Irish SMEs have been left in limbo on the application date of legislation to implement the directive. The directive states that the new rules must apply for financial years commencing on or after 1 January 2016 at the latest. We welcome clarification from the Department in a note circulated to Oireachtas Members yesterday that there will be early application of the Bill before enactment, thereby allowing companies to apply the provisions of the Bill to financial years that begin after 1 January 2015. Regardless, the directive requires the inclusion of financial information relating to the previous financial year, which must appear in the first set of financial statements filed after the enactment of the Bill. While practitioners in the field have welcomed the Bill, the delay in transposing the directive "has caused difficulties for many small and micro-companies in Ireland in meeting their financial reporting requirements". That is according to Chartered Accountants Ireland.

Smaller companies should not be disproportionately burdened by the inept progress in implementing the directive agreed more than years ago. Surprisingly, the directive was enacted by the UK in 2015 and the changes have been effective for accounting periods beginning on or after 1 January 2016, with early application permitted for accounting periods beginning on or after 1 January 2015. That has put Irish SMEs at a direct disadvantage as current qualifying thresholds are not as benign as those that are set out in the directive. That is yet another example of the slow response by the Government pre and post the Brexit referendum in taking every contingency measure at its disposal to safeguard Irish company jobs and exports. Instead, the Government has placed Irish SMEs and especially microenterprises at a competitive disadvantage and on an unequal playing pitch for accounting and reporting purposes with their European competitors. That follows the general trend of the recent budget where token action was taken to improve competitiveness.

We remain very disappointed that the UK will still have a more attractive capital gains tax, CGT, relief which applies a 10% rate to entrepreneurial gains of up to £10 million sterling, which is far in excess of the €1 million Irish limit. We must improve our competitiveness with the UK much further. The chief executive of the Irish Exporters Association, IEA, has said that the reduced CGT rate "does not bring us onto the racetrack" when the UK has a ceiling ten times the scale of Ireland’s €1 million threshold.

The Taoiseach often trots out the line that he wants Ireland to be the best small country in the world in which to do business. He famously set the target of 2016 to achieve that. While the World Bank ranks Ireland in the top 20, many other similar scale OECD countries rank higher than Ireland. They include New Zealand, Finland, Denmark, Norway and Singapore. The Government has continued a general policy of inequity in concentrating job creation sparsely nationwide. There has been a clear failure by Government to create a balanced jobs policy towards the regions, as evidenced by the emergence of a two-tier recovery, with job creation concentrated nearly exclusively in the capital and the commuter belt region. A total of 43% of Ireland's GDP is generated in the capital, while more than 50% of all jobs created in the 12 months to the fourth quarter of 2015 were in the same location.

Ease of doing business is vital for attracting new participants into the marketplace, whether they are home-grown enterprises or businesses seeking to gain a foothold in Ireland. It is also vital that we have a regulatory framework that permits businesses to flourish. There needs to be immediate transposition of the directive and enactment of the legislation in order to ensure that Irish small and micro-companies are on a level playing field with counterparts in Northern Ireland, the UK and other European member states.

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