John McGuinness (Carlow-Kilkenny, Fianna Fail)

This is essential and could be easily piloted in that region so that we can experience at first hand what it is like to grow into an Enterprise Ireland client, grow from there into a bigger company, use the technology and educational infrastructure and ensure we are ready for the next curve within our economic development. We must be ahead of that curve and the only way we can do it is to invest in that type of third-level facility in collaboration, not just with the other educational operators, but with those in business in ensuring that we have that cross-support from business and commerce in the educational sector.

The report of the Small Business Forum has underlined for us all the extraordinary contribution that the small business sector is making to our economic prosperity. Research carried out on behalf of the forum showed that in 2002, small businesses paid 11% of corporation taxes, or around €520 million, 37% of income taxes, or almost €4 billion, and 50% of VAT in the services sector or over €4 billion. The report contains a detailed analysis of the factors that drive the small business sector and has provided us with a blueprint for the further development of the sector. The Government has already made considerable progress on the implementation of the report's findings. Examples taken to date include the fact that the threshold for the exemption from the requirement that companies have their accounts audited has been increased from €1.5 million to €7.3 million.

The budget in December 2006 included a package of measures designed to help the small business sector, including the extension and radical improvement of the business expansion and seed capital schemes up to 2013. European Commission approval for the extension of the business expansion and seed capital schemes up to 2013 was received in late August 2007. In announcing budget 2008 on 5 December 2007, the Tánaiste and Minister for Finance announced that the requirement that recycling companies must have received grant assistance before availing of the business expansion scheme is to be replaced by a requirement that their business proposals be certified by an industrial development agency or county enterprise board before they avail of the scheme. As the business expansion scheme is an approved State aid, it will be necessary to advise the European Commission of this proposed change.

In his Budget Statement in the Dáil on Wednesday 5 December, the Tánaiste and Minister for Finance, Deputy Brian Cowen, announced the following initiatives aimed at reducing administrative reporting burdens on small and medium employers. With effect from 1 March 2007, VAT registration thresholds for small businesses were increased from €27,500 to €35,000 in the case of services and from €55,000 to €70,000 in the case of goods. These thresholds are being further increased from 1 May 2008 to €37,500 for services, and to €75,000 for goods, respectively. The measure will take about 2,700 businesses out of the VAT system.

The Finance Act 2007 confirmed the changes to the preliminary tax obligations of certain companies, as recommended by the Small Business Forum. Small companies are now permitted to calculate their preliminary tax payments based on 100% of the prior-period tax liability if their tax liability for the prior period did not exceed a certain threshold. The Act increased that threshold from €50,000 to €150,000. This threshold was further increased to €200,000 as part of budget 2008. This will be effective for preliminary tax payment dates arising after 5 December 2007. New companies which do not expect their tax liability for the first year to exceed €150,000 are no longer obliged to pay preliminary tax in that first year. This threshold was further increased to €200,000 as part of budget 2008. This will be effective for preliminary tax payment dates arising after 5 December 2007.

The innovation voucher scheme was launched in March. This scheme provides an incentive to small businesses to explore new ideas within their businesses and should help drive levels of innovation within the sector. A total of 350 companies were awarded vouchers of €5,000 each up to the end of September 2007. I understand that Enterprise Ireland has received a further 156 applications, which are currently being processed.

As part of the implementation of the Government's science, technology and innovation strategy, Enterprise Ireland has been working on developing a suite of supports specially designed for the particular needs of manufacturing and internationally traded service companies. This includes an R&D stimulation grant to encourage companies that have not carried out research and development in the past or which have done so on a sporadic basis to develop the establishment of a sustainable research and development activity. Within the context of the new R&D stimulation grant programme, Enterprise Ireland will deliver the knowledge acquisition grants scheme, which will allow grants of up to €50,000 to be paid on a once-off basis for projects up to one year.

There is huge scope in the area of research and development for job creation, particularly in the food sector. One thinks of many of the giants, such as Glanbia with its research and development, heading up what is best practice throughout the world and engaging with huge multiples so that they feed what is desirable in the context of the food industry back into those companies. Supported by the Government, they are able to bring about innovation and research and development and fulfil the market desires of the companies dealing directly with the end client. We must continue to support this area and establish our niche market in the context of that knowledge-based economy to ensure there is continuing investment so that job creation in this area will be to such an extent that we will become the world leaders in a necessary area of development relative to the food chain and the demands of such new economies as China and India. We must constantly focus on this area to ensure that the small and medium-sized enterprise area is heavily plugged into what is happening on the world stage so that it can also play the important role we need it to play to create sustainable jobs into the future.

In respect of reducing the regulatory burden on business, a high-level group on business regulation was established comprising representatives of Departments and agencies, the business sector and the Irish Congress of Trade Unions. This is chaired by the Secretary General of my Department. The group will seek ways to reduce and simplify administrative burdens, particularly those affecting small and medium enterprises. The group is focusing on actions in the five priority areas identified by the business regulation forum. To date, it has addressed concrete measures such as tax clearance certificates, waste licences, audit exemption thresholds, work permits, redundancy payments, etc.

This process is best served to address the recommendation and believes that a strong input from business as to which regulatory requirements are causing the biggest burdens is critical. Departments must understand the regulatory burden with which business must comply. Forms from the CSO must be revised and we must understand who these forms target. It can take much energy for a micro, small or medium sized business to complete the forms. I come from that sector and know that people tick boxes simply to comply. The analysis carried out of these forms cannot be accurate because compliance drives form-filling.

The regulatory burden on micro-business should be reviewed to determine if it is needed or if it should be reduced to once per year. For small and medium enterprises, the forms should be simplified and made more relevant to the business. These minor wins would give comfort to business, knowing that business is being acknowledged, there is space for it, that it can develop and someone is listening. We hear the cases for this being made during budget time but there is no ongoing engagement with the SME sector to give it confidence and help it understand that we are in partnership together.

The Revenue Commissioners are the best example in this area.