Local TD Denis Naughten has called for reductions for VAT and PRSI rates for food businesses in the hospitality sector to be introduced before Easter to offer a lifeline for businesses.
“I have been contacted by a number of local retailers and restaurants who are really struggling to keep their doors open at present and, sadly, some have already taken the decision to close their business. Not only is this having an impact on employment, but it is also seriously damaging the retail and visitor experience to our towns and villages, undermining the viability of many more businesses,” said Denis Naughten.
“This is also undermining the significant investment that has come from Government under urban and rural regeneration funding for our local communities, investment funds which I fought hard to establish during the last Government and which were beginning to make a real impact in our towns and villages.”
Denis Naughten, along with his colleagues in the Regional Group, is calling for the reduction of the current VAT rate of 13.5% to 9% for food businesses in the hospitality sector before Easter. Adjusting the 8.8% employer’s PRSI threshold to a ceiling wage of €495.30 per week, will also offer a lifeline for many businesses.
The proposals will be made by the Regional Group in its Private Members Motion to be debated on Thursday next, to support Small and Medium Enterprises which are struggling to stay in business due to recent Government charges. The Group also recognises the vital role these businesses play in our local economy and communities.
The motion calls on the Government to immediately establish a taskforce representative of small businesses along with Government departments and agencies to review the application of all Government controlled costs and to reduce Government charges and costs of doing business.
SMEs are a critical pillar of the Irish economy with more than 1.2 million people employed by SMEs in Ireland.
Government policy decisions have increased the cost of doing business significantly, particularly in the SME sector and many are facing significant cost challenges.
“Not only do I want to see short term action this side of Easter to address VAT and PRSI costs, but also the establishment of a taskforce to bring about practical changes in Government costs and red tape over the following months,” commented Denis Naughten. “This taskforce is designed on the very successful Broadband Taskforce which I established in 2016 and which made a real difference in fast tracking the roll out of mobile and broadband services.”
That Dáil Éireann
- Micro and Small and Medium Enterprises (SMEs) are a critical pillar of the Irish economy;
- the people who create and lead SMEs throughout the country are incredibly diverse; from family-owned businesses, rural-owner managers, traditional to high growth and technology start-ups;
- there are more than 1.2 million people employed by SMEs in Ireland;
- SMEs represent up to 99.8% of active enterprises with 69.2% persons employed, which generated 41.5% turnover, and GVA (Gross Value Added) of 34.8% in 2021;
- the vast majority of these enterprises are micro-sized enterprises that employ less than 10 people;
- Government policy decisions have increased the cost of doing business particularly in the SME sector significantly;
- many SMEs including rural and regional micro, small and medium sized businesses are facing significant cost challenges;
- PwC recently predicted that the number of business insolvencies would grow to 1,000 this year with the retail, hospitality, and construction sectors coming under particular pressure;
- input costs due to the increases in energy, inflation, insurance, cost of labour, national minimum wage increases, higher PRSI, plans for pension auto-enrolment, extended sick-pay entitlements on top of VAT increases, along with many other input factors are making it very difficult for small businesses to continue trading;
- a recent IBEC survey found that additional costs associated with energy, inflation, and labour were leading concerns for businesses in the hospitality, retail, travel, food, drink, tourism, and entertainment sectors;
- increased wage levels for those on employment permits will have additional implications for the food processing, horticulture and healthcare sectors;
- a combination of higher costs will lead to rising prices and closures;
- the present challenges to business viability in the restaurant and hospitality sector has the potential to significantly affect tourism this year;
- increases in the national minimum wage, will not address the cost-of-living issue for employees because in the absence of access to affordable housing, most increases in wages will go to pay increased housing costs;
calls on the Government to:
- immediately establish a taskforce representative of micro and small business with Government departments and agencies personally chaired by a Cabinet Minister to review the application of all Government controlled costs and to reduce Government charges and costs of doing business, with quarterly updates provided to the Joint Oireachtas Committee on Enterprise;
- as an interim measure:
- reduce the current VAT rate of 13.5% to 9% for food businesses in hospitality sector before Easter;
- ensure the 8.8% employer’s PRSI rate cover the full national minimum wage level by increasing the 11.05% threshold from €441 to €495.30 per week, commencing before Easter;
- expedite the work permit process and abolish welfare traps which will greatly aid staffing shortages;
- revise the debt warehousing scheme to allow longer repayment schedules and preferential interest rates to retain business viability and sectoral employment;
- develop an action plan for financial education to strengthen the financial management skills of small business owners and managers;
- create a panel of industry expert advisors and mentors for SMEs partially funded by the State;
- expand access to credit initiatives for SMEs; and
- enhance flexibility in government procurement of state services to permit departments such as Education, Health, Defence, and Local Government to procure supplies from local suppliers, as opposed to relying solely on central purchasing.