Some work done, more to do. That’s the broad consensus on how the Government is working to help start-ups and SMEs in the State; the recent budget and general election naturally gave companies plenty to consider regarding what is on the table for businesses trying to scale.
“We’re very happy to see that many of the parties have a strong focus on the indigenous tech sector,” says Martina Fitzgerald, chief executive at Scale Ireland. “We were happy with the change in the R&D tax credit – incrementally it has gone up – in the budget.”
The word incremental is relevant; Alan Bromell, head of private enterprise at KPMG in Ireland, says more could have been done.
“While these measures are welcome, key factors that impact an SME’s ability to scale and grow are access to risk capital and talent, and there is scope for Ireland’s tax policy to better support indigenous business in these areas,” he says.
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Finding how to access the supports that are available is a core issue regarding tax policy; the complexities of accessing the Government’s different schemes have kept take-up relatively low. Fitzgerald says there needs to be a direct approach from the State to address this, with Revenue having a role to play in encouraging more companies to avail of the schemes available.
“Across the board we’re getting a strong message from founders that they are not taking up many of the schemes because they’re not simplified enough,” she says. “A scaling division within Revenue would be able to focus on the clear challenges within the sector and be able to set targets for take-up of schemes in start-ups and SMEs.”
The Key Employee Engagement Programme (KEEP) is one where take-up is particularly low. Fitzgerald says companies are wary of engaging with KEEP due to the complexities surrounding it and the penalties for errors in applications.
“Market valuation is hard to work out under KEEP. We’d like accepted industry practices, like the prior funding round as a basis, to be used. If you file an incorrect KEEP application, it comes with the potential penalty of barring a company from using the scheme.”
All of this makes investment in start-ups and SMEs seeking to scale an onerous task. It’s an area that Daryl Hanberry, head of tax and legal at Deloitte, feels needs to be addressed at a government level. Ireland should also redouble its efforts to grow its domestic direct investment (DDI) sector, in his view.
“Our goal should be to nurture Irish DDI businesses and ensure they grow to become exporting unicorns – businesses with a valuation of over $1 billion – and follow in the footsteps of some very successful Irish PLCS,” says Hanberry.
“These DDI businesses should be created, scaled and be capable of competing all over the world. It is vital that high-potential businesses have a tax environment which compels them to grow, scale and stay in Ireland as opposed to grow, scale and sell.”
Hanberry says the Government should have clear and direct targets for business development, with an aim of 10 such Irish unicorns over the next decade.
“In Portugal, where the country is seeking to utilise innovative taxation measures to support growth and investment, there are six unicorns. We would like to see the Irish Government resource the policy goal of supporting DDI and apply this to meaningful reform of tax supports for entrepreneurs and scaling businesses,” he says.
There were some promising initiatives for the start-up and SME sector within the budget, Hanberry adds. He sees the upgrade to the Employment Investment Incentive Scheme, in particular, as an indication that his suggested target is realistic.
“The amendments to the EIIS and development tax credit regime and the introduction of tax relief for listing expenses introduced in this year’s Finance Act are welcome as they will provide a much-needed cash flow boost to businesses,” he says.
“Even the Special Assignee Relief Programme plays an important role as it allows Irish headquartered companies to hire appropriate talent abroad to fill key roles where the skills may not be available in Ireland. Otherwise, those people may be hired in foreign jurisdictions, resulting in a shift of leadership and decision-making capabilities outside of Ireland.”