Industry groups react to Budget 2007
07-12-2006
by Charlie Taylor

Reaction to the Budget from technology and business organisations has been largely positive although inadequate funding for IT in schools is a concern.

Among the key measures introduced in Budget 2007 were an extension and enhancement of the Business Expansion and Seed Capital Schemes; a EUR200 million increase in government spending on science, technology and innovation; and improvements to the R&D tax credits. In addition, a range of IT projects such as a new, integrated asylum and immigration system for the Irish Naturalisation and Immigration Service (INIS) were announced. The INIS project, which is estimated to cost around EUR8.5 million, is to commence in January 2007.

For the most part, industry organisations welcomed the Finance Minister's latest budget, with many commending Brian Cowen for his pro-business stance. However some representatives did feel the Minister could have done more to support the development of the indigenous technology industry and reward high value risk investment.

ICT Ireland, which represents the indigenous high-tech sector, welcomed the Government's commitment to promoting R&D. The organisation's director, Kathryn Raleigh, said the extension of the rolling base period from three to six years, and the qualification of sub-contracted R&D would make the scheme more relevant to the technology sector.

Nonetheless, the group expressed concern about the Government's failure to announce detailed measures to alleviate the high cost of energy, and claimed the Minister had missed an opportunity to increase the spend on technology in Ireland.

According to ICT Ireland, the total allocation for technology-related education equates to EUR40 per student, which Raleigh described as "utterly inadequate and significantly behind that being invested in England".

The Irish Software Association (ISA) meanwhile welcomed the continuation of the Business Expansion Scheme (BES) and Seed Capital Scheme (SCS) for another seven years to 2013.

"The ISA sought and secured an extension of both schemes to 2013 and an increase in the investment limits. The increase in the investment limits per company up to EUR2 million (from existing limit of EUR1 million) and an increase in personal investment limits from EUR31,750 to EUR150,000 per annum for the BES, and EUR100,000 for the SCS, are welcome," said ISA director Michele Quinn.

"Access to funding between the business idea stage and the later stages of growth and export is the largest hurdle for start-up companies. The ISA believes that this decision will encourage a greater level of investment in small, high-risk, innovative companies."

The ISA also welcomed the changes to the R&D tax credit scheme, but expresseddisappointed that the Government did not make any significant moves to make the existing R&D tax credits scheme more accessible to SMEs, many of whom do not qualify under the existing scheme.

Although improvements to the R&D tax credit system were welcomed, some critics didn't believe the Budget went far enough.

"The Minister announced some welcome improvements to the R&D tax credit system. However, these changes fall significantly short of making the Irish regime competitive relative to the systems available overseas," said Joe Bollard, tax partner with Ernst & Young.

"Ireland has a proven track record in using tax incentives in attracting high-quality foreign investment to Ireland. We encourage the Minister to urgently consider investment in a long-term tax incentive package which will promote Ireland as the global centre for innovation and knowledge based industries," added Bollard.

The US Chamber of Commerce in Ireland said the decision to increase tax credits by EUR70 million fell short of what is needed to encourage further levels of R&D expenditure by multinationals.

The Small Firms Association described Budget 2007 as good news for small businesses, although it was critical of the EUR3 million in additional funding to promote energy efficiency in SMEs, calling it a "token gesture".

Ibec also expressed praise for the Budget with its director general, Turlough O'Sullivan, claiming it was "a good budget for entrepreneurship through improved support for start-ups and SMEs."

Chambers Ireland, which claims to be the country's largest business organisation with 59 constituent chambers representing over 12000 businesses nationwide, also came out in favour of the Budget.

"We welcome the increase in the ceiling of the Business Expansion Scheme, the significant change in the VAT registration threshold, streamlined revenue procedures: three pro-business measures which we had sought in advance of the budget," said Chambers Ireland's chief executive John Dunne.