Wednesday, December 07, 2011

Bruton welcomes pro-jobs measures in Budget


Minister for Jobs publishes tender and unveils further details of Temporary Partial Loan Guarantee Scheme, expected to be operational in Q1 2012

The Minister for Jobs, Enterprise and Innovation, Richard Bruton TD today welcomed a series of pro-jobs measures in Budget 2012, announced today by the Minister for Finance, Michael Noonan TD.

Minister Bruton said that as a result of a series of measures announced, it would be cheaper and easier, to engage in crucial R&D activities, to export to key growth markets, to run a start-up company in Ireland and ultimately to create jobs.

The principal measures include:

·        Leaving income tax untouched. Both international and Irish evidence shows that low labour taxes support jobs.

·        To incentivise company start-ups, the corporate tax exemption for start-up companies will be extended to include companies who commence trading in 2012, 2013 and 2014. Most jobs are created by start-up companies.

·        A Foreign Earnings deduction. This targeted deduction will apply where an individual spends at least 60 days a year developing markets for Ireland in Brazil, Russia, India, China and South Africa, and will incentivise companies to place staff overseas to encourage export sales.

·        Restatement of the Government’s firm commitment to the 12.5% rate of corporation tax.

The Minister for Finance also announced a series of changes to the research and development tax credit, a widely-used tax credit which was previously improved in May’s Jobs Initiative. This is aimed at encouraging companies, both domestic and multinational, to spend on research and development, and currently allows them to write off a portion of such expenditure against corporation tax. The changes announced today will be targeted particularly at encouraging SMEs to engage in R&D, and will mean that:

·        A greater portion of the total spend on R&D can be written off, by including without restriction the first €100,000 spent for the purposes of availing of the credit. This measure is included in the Programme for Government.

·        Businesses who outsource research and development activities to universities or other organisations will be subject to fewer limits in availing of the tax credit. Since SMEs generally have less in-house R&D capabilities than larger companies, this will make it easier for them to avail of the tax credit and will encourage the creation of new high-value R&D jobs

·        Companies will have the option to use a portion of the R&D tax credit to assist in the employment of key employees to drive the development of R&D

Other measures include:

·        A package of measures to support the continued success of the financial services industry – in particular the international funds industry, the corporate treasury sector, the international insurance industry and the aircraft leasing industry.

·        A Special Assignee Relief Programme. Many senior employees and key leaders in multinational corporations are internationally mobile within their organisations. Often these people have large teams around them and are key decision makers. Today the Government announced a series of measures to make it more attractive for these people to locate in Ireland.  This, in turn, will increase the chances of the Irish operations of these corporations winning future jobs and investments, particularly in the start-up phase.

Minister Bruton recently announced, along with the Taoiseach and the Tánaiste, details of a Temporary Partial Loan Guarantee Scheme and a Micro-Finance Loan Scheme and the Minister for Finance referred to these measures in his speech today. The Minister today announced the publication of a tender for an operator for the loan guarantee scheme, and unveiled further details of the Scheme (see notes for editors).

The Minister for Finance also indicated that he would be considering other measures for inclusion in the Finance Bill, and Minister Bruton today signalled his intention to make further submissions to Minister Noonan in that regard.

Welcoming the announcements, Minister Bruton said:

“The Government is determined that, alongside the very painful budgetary decisions we have to make, we must implement our plan for economic recovery and job creation. There are many aspects to this, including January’s Action Plan for Jobs and of course the crucial task of restoring our public finances to a sustainable path.

“This Budget represents a positive step towards restoring our international reputation and restoring confidence in Ireland as a location for investment, trade, and job-creation. It also includes a series of tax changes to incentivise businesses, from SMEs to large multinationals, to establish, grow and invest in job-creating activities. In the context of the severe constraints on the public finances and the need to make adjustments, this represents a significant statement of Government priorities.

“As a result of the measures announced today:

·        It will be easier for many micro-enterprises and SMEs to access vital credit

·        It will be easier and cheaper for small businesses to engage in crucial research and development activities

·        It will be cheaper and easier for businesses to export to key growth markets in Brazil, Russia, India, China and South Africa

·        It will be easier and cheaper to run a start-up business

ENDS.

NOTES FOR EDITORS

Temporary Partial Loan Guarantee Scheme

Minister Bruton yesterday published a tender for the management and operation of this scheme. Some of the key features of the scheme are as follows:

Under the Scheme, the government will partially guarantee loans by traditional lenders to viable businesses that are at the margins of commercial lending decisions and have difficulties accessing credit for either of two reasons:

·        insufficient collateral

·        the lender does not have the skills or experience to carry out a proper assessment of the proposition, due to a lack of knowledge of new sectors, markets or technologies.

The Scheme will be temporary in nature. Initial provision has been made for €450million in new lending to be guaranteed over three years.

The scheme will be demand-led, and the total amount of funding guaranteed will depend on demand, which will be monitored and will be reviewed depending on demand.

If €450million in lending is guaranteed, the Scheme is estimated to benefit over 5000 businesses, and provide over €75million in net benefit to the exchequer. The return on the State’s investment is estimated at 400%.

Micro Finance Loan Scheme

The Government also signed off on the establishment of a Micro Finance Loan Fund, to provide loans on a commercial basis for start-up businesses and micro-enterprises. It is expected that the businesses that will primarily benefit will be those at the margins of commercial lending decisions. The Scheme will use an initial exchequer investment of €10million to leverage further funds from private sources. Over a ten year period, the scheme has the potential to provide up to €100million in additional lending to over 5000 micro-enterprises over that period. The Scheme will be demand-led and the amount of funds provided will depend on the demand from viable businesses

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