Robert Troy: Minister Michael McGrath must focus his Budget on helping small firms export

The justification for this is obvious: exporting firms have been demonstrated to be bigger, to have greater productivity, to be more skill and capital intensive, and to providing better salaries than firms that are confined to the domestic market.

With this in mind, and as the forthcoming Budget will be the first one since the publication of the White Paper, there is a compelling reason to take positive action to support and incentivise domestic businesses in this year’s budget so that they play a bigger role in the economy and ensure that we are not over-dependent on the multinational sector for jobs, investment and tax revenues.

I believe that we have an opportunity to address a trend where the revenues from Foreign Direct Investment (FDI) provide us with the largest part of our annual tax take (€20bn in 2022). It is vital that we balance this with indigenous enterprises that can scale sufficiently and indeed become the FDIs of other markets, in due course.

As recently as last week the Central Bank again highlighted the notable drop in export growth for goods and services from 13.9pc to just 0.2pc in 2023 and the forecast of growth for 2024 is 2.9pc.

Furthermore, the Central Bank also commented that corporation tax accounts for 45pc of the growth in tax revenue and is concentrated in a small number of foreign owned firms. Tellingly, the Central Bank economics director told the Oireachtas Committee on Budgetary Oversight that the growth in tax revenue over the last five years was almost identical to that in the period from 2002-2007. If, for whatever reason, one or more of our multinationals decided to leave, we would be exposed, and a hole blown in our tax take.

Fortunately, though, the minister is conscious of these developments and has highlighted them many times, and Government has taken a number of steps to mitigate our exposure. €6bn in windfall corporation tax receipts have been transferred to the National Reserve Fund, and work is ongoing in relation to establishing a longer-term investment fund.

While we still have time it is paramount that we reach the stage where we lessen our dependence on foreign investment and in this regard what is crucial is that Irish entrepreneurs believe they can compete on a level playing field and be rewarded for taking risks on the international stage. Under those circumstances Irish businesses will grow, pay tax, and create employment. I propose the following:​

1) The Irish Stock Exchange (Euronext Dublin) is no longer attractive to Irish Companies whose primary focus is on scaling up, achieved by a bigger pool of investors and more opportunities to grow. It’s time we looked at our tax incentives for business owners who sell their own shares in companies as part of an initial public offering (IPO) or a tax credit scheme to make the IPO process cheaper for new businesses. This is not about matching the NY Stock Exchange but making our exchange more attractive and appealing.

2) There is a significant number of Irish exporters and employers who are not clients of Enterprise Ireland or the Local Enterprise Offices. These companies have made it clear to me that they need encouraging tax measures in this year’s budget. Amending Capital Gains Tax and enhancing the Employment Investment and Incentive Scheme (EIIS) will be material and self-financing over a five year period.

Ireland is one of only two EU countries that does not currently have an export credit guarantee scheme. Such a scheme would assist to level the playing field and help to introduce new players to our exports.

We are very fortunate to have Enterprise Ireland and the work it does to help its clients navigate new markets – regrettably figures provided to me earlier in the year identified a worrying number of vacancies in Enterprise Ireland offices abroad.​

3) Irish owned businesses feel discriminated against being excluded from the Special Assignee Relief Programme (SARP). We need to examine the extension of this to indigenous businesses.

4) Many owner managers will tell you they don’t have the “band width” to absorb all the administrative burden associated with the Irish tax regime when it comes to indigenous businesses and entrepreneurs. Paperwork is seldom an entrepreneur strength and can strangle a profitable business. A review of the current system is overdue.

The fact is that our indigenous enterprises are not active in international markets, with less than 10pc SMEs directly trading across borders. It is critical that this changes and I hope that Finance Minister Michael McGrath will take action to address this.​​​​​​​​

Robert Troy is a Fianna Fáil TD who served as Minister of State at the Department of Enterprise, Trade and Employment from July 2020 until his resignation in August 2022