Relief and despair among business groups at budget measures

Business groups have given a mixed response to Budget 2022, with some measures welcomed and others branded "underwhelming".

Alongside relief at the confirmed continuation of some Covid-19 business supports, representative organisations expressed disappointment that more was not done to help alleviate difficulties facing businesses, such as labour shortages and subdued post-Covid city centres.

Retail Excellence and the Restaurants Association of Ireland (RAI) were among the harshest critics of the package of policies unveiled by Minister for Finance Paschal Donohoe and Minister for Public Expenditure and Reform Michael McGrath, with Retail Excellence managing director Duncan Graham concluding it was "not a budget for business" and RAI labelling it "disastrous".

“Retailers have significant legacy debt along with rising energy costs which will prove to be challenging and have not been fully addressed by this budget. We have seen an extension of the commercial rates waiver but it is worrying that this is not universal,” said Mr Graham, who also called for a “robust plan” to address staff shortages and Brexit pressures.

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RAI chief executive Adrian Cummins, one of the first to respond to the budget announcements, said the Government had showed "no ambition" to stimulate and revitalise the tourism industry and criticised the failure to extend the lowered 9 per cent VAT rate beyond August 2022.

“This budget is a disaster for our members, restaurants, cafes and gastropubs, a vital element of our tourism offering. The VAT rate ending, and wage supports tapering off will be the death nail in the coffin of many hospitality businesses this winter.”

Small Firms Association director Sven Spollen-Behrens said the fiscal package was “underwhelming for small businesses”, but he welcomed the extension of the commercial rates waiver for the experience economy, the expansion of the Employment and Investment Incentive Scheme (EIIS) to attract investment and the extension of the Employment Wage Subsidy Scheme (EWSS) until the end of April 2022.

“These measures, particularly committing to EWSS, will help small businesses get back on their feet,” said Mr Spollen-Behrens.

But “in many ways” it was “an expensive budget for small business” that risked job creation and retention into 2022, he cautioned.

Inflationary pressures

Ibec chief executive Danny McCoy commended the budget for what he said was a targeted use of measures to help offset inflationary pressures for households and businesses.

“Budget 2022 must be seen in the context of following the two largest years of fiscal expansion in the history of the State and massive supports for households and businesses,” said Mr McCoy, describing it as “a return to a more normal budget”.

The extension of wage subsidies and targeted measures to reduce childcare costs were among the elements he hailed as “promising”.

Chambers Ireland welcomed the focus on capital investment, childcare and remote working, but said it was disappointed by the 3 per cent zoned land tax. "It is pitched at a level which will raise revenue for the exchequer, while at the same time it is not high enough to incentivise the return of hoarded land to the open market," said Chambers Ireland chief executive Ian Talbot.

“The price of land is the easiest part of the cost of housing equation for the Government to influence and they have chosen not to do that in this budget.”

The Irish Tax Institute was also among the organisations to welcome the continuation of the EWSS.

"We all know that the recovery has been uneven across the economy and there are businesses that are struggling to return to pre-pandemic levels of trading. The decision to continue the EWSS and the reduced rate of employer's PRSI will be of enormous benefit to these businesses," said the institute's president Karen Frawley.

“I think the Minister got the balance right between supporting the businesses that have been hardest hit by the pandemic and the need to protect the public finances,” she said.

Chartered Accountants Ireland agreed that avoiding a cliff-edge end to the EWSS would give “vital certainty” to those pandemic-affected employers still availing of it.

"These supports cannot last forever, but their presence over the last 18 months has been an example of a targeted, partnership-based approach by the State which has kept many businesses afloat," said the body's professional tax leader Norah Collender.

She also noted the announcement that certain start-up companies can continue to benefit from reduced corporation tax and the extension of this relief from three to five years.

‘Struggle for survival’

“The struggle for survival is a reality for start-up companies, and that struggle is even more acute for businesses starting out just as the country recovers from a pandemic and ongoing Brexit disruption. A reduced corporation tax liability for such businesses will help cash flow and is a worthwhile endorsement of the Irish entrepreneurial spirit.”

The Irish Home Builders Association said it particularly welcomed the extension of the Help to Buy scheme, while the Construction Industry Federation warned that unless systemic barriers to construction were removed, the Government's investment in the sector would be undermined.

Elsewhere, airport operator DAA "warmly welcomed" the €90 million aviation package, the Irish Hotels Federation called on the Government to extend the 9 per cent VAT rate until after 2025, and the Irish Exporters Association called hailed the climate focus of the budget, though its chief executive Simon McKeever called for a more coherent approach on the issue.

“Until constructive and robust consideration is made to creating effective synergies between businesses and relevant departments, we believe that significant change will not be achieved.”