Tax Revenue Overshoots Forecast By €5 Billion

06 Aug 2020 | 10.44 am

Tax Revenue Overshoots Forecast By €5 Billion

ISME survey of 237 small firms

06 Aug 2020 | 10.44 am

Small and medium enterprises are more than twice as concerned about economic uncertainty than they are about Brexit, according to a trends survey from small firms lobby group ISME.

The organisation’s Q2  Trends Report and July Covid survey shows that the top concern for SMEs is economic uncertainty, almost double the figure for Brexit and way ahead of concerns over insurance costs.

Confidence has recovered a little, though from a very low base. For example, on ‘business mortality’ 2.7% of those surveyed predicted their business would fail within a month — at the end of April 11% predicted this outcome.

ISME chief executive Neil McDonnell  (pictured) said: “We are delighted to see business sentiment rise in the current environment. But there is a long road ahead for many SMEs, with Covid-19 and a hard Brexit remaining a serious threat for many. 

“The week after a botched attempt to remove the TWSS from proprietary directors, and the same week the Commission for Regulation of Utilities announced an average €8,700 (128%) increase in the energy PSO levy for many small businesses, the state must work much harder to protect our job creators. 

“We call on ministers Donohoe and McGrath for more meaningful and robust business supports and tax measures in Budget 2021.  The July Stimulus was a good start, but did not go far enough.”

Pessimistic Tax Forecasts

Underpinning the government’s decision to scale back wage supports from September 1 and to cut PUP payment rates are Department of Finance tax revenue forecasts that have proved to be overly pessimistic.

For July, tax revenues were €750m ahead of what DoF predicted in April. Year to date at end July, tax revenue was €5 billion greater than what DoF mandarins predicted  in the Stability Programme Update issued in April 2020.

This matters because tax forecasts feed into government stimulus measures such as those announced in late July. If civil servants were more accurate in their forecasting, then ministers might be more generous with their aids to locked down business and individuals.

According to ISME, seven out ten firms among the 237 sample members in the survey are availing of the TWSS, with one third of self-employed respondents availing of the PUP. McDonnell expressed surprise that six out of ten respondents have not yet asked for assistance from their bank.

Six out of ten survey respondents indicated they would not increase their earnings from the business this year, with one in three saying their earnings would decline.

The Trends Report can be downloaded here, the Covid-19 survey here, and ISME’s pre-budget submission here.

Redundancy Provisions

Meanwhile, the government has extended the suspension of redundancy provisions relating to the temporary lay-off and short-time work until September 17.

This extension follows on from when the suspension of such redundancy provisions that were introduced in March when the Covid-19 emergency situation arose.

Social protection minister Heather Humphreys said the extension will help prevent redundancies that could occur in the very near future which would burden employers with further debt and have a serious impact on the potential for a business to recover.

“The further extension until September 17 is necessary to mitigate against the risk of insolvency and bankruptcy situations, further job losses and will contribute to the viability of business,” she stated.

An employee’s right to claim redundancy has not been removed, but deferred for the emergency period in circumstances of temporary lay-off or short-time employment.

Genuinely Seeking Work

The minister added that where restrictions are still having an impact, for example in the pubs, arts and entertainment sectors, workers who remain temporarily laid-off are not required to meet the ‘Genuinely Seeking Work’ requirement for work in other sectors.

A department spokesman stated: “It is important to point out that the Redundancy Payment Acts and the Social Welfare (Covid-19) (Amendment) Bill 2020, as passed by both Houses of the Oireachtas, are separate pieces of legislation.

“Section 11 of the Bill is very clear that the work a person is seeking but unable to obtain has regard for being suitable to the education and normal occupation of the jobseeker. Therefore workers temporarily laid off or artists waiting for venues to reopen will be deemed to meet the Genuinely Seeking Work conditionality if the Bill is signed into law by the president.”

 

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