Wednesday, 10 December 2008
Dáil Eireann Debate
66. Deputy Damien English asked the Tánaiste and Minister for Enterprise, Trade and Employment the communications and discussions she has had to date with the Office of the Revenue Commissioners and with the Department of Finance on behalf of small and medium enterprise specifically in relation to attachment orders issued by the Revenue Commissioners; her views on whether SMEs would benefit from restructuring in the way that these attachment orders are administered; the proposals she will bring to the Department of Finance on behalf of SMEs that will see changes to the manner in which such attachment orders are executed; and if she will make a statement on the matter. [45384/08]
Deputy John McGuinness: The collection of taxes and the issue of attachment orders are the responsibility of the Revenue Commissioners. It is therefore not appropriate for me to comment on the execution of, or the administrative arrangements applying to attachment orders.
Neither the Tánaiste nor I have had discussions with the Revenue Commissioners or with the Department of Finance in respect of attachment orders nor are we working on any proposals relating to attachment orders.
On a broader front, the Tánaiste has had discussions with ISME and SFA, and I also met the SFA last week on a range of issues, including access to finance, which are impacting on SMEs arising from the current economic difficulties.
Discussions between the Tánaiste and the Minister for Finance, Deputy Brian Lenihan and discussions between my Department and the Department of Finance at official level, have focused on addressing difficulties arising in accessing bank credit and ensuring that the banking system continues to play an appropriate role in supporting the SME sector. Over the past week, there have been several announcements by Irish banks of making special funding available to SMEs. In addition, as recently confirmed by the European Investment Bank, several Irish banks are in contact with the EIB seeking to draw down funding available under the EIB’s €30 billion fund for assisting small and medium size enterprises. The EIB has anticipated that funding will probably be drawn down during the first quarter of 2009. I welcome these positive developments which should facilitate greater availability of finance to the SME sector.
All taxpayers and businesses have an obligation to meet their tax liabilities in a timely manner. A delay in the collection of revenues due impacts on the level and timeliness of financial resources available to the Government and facilitates those who, by withholding tax payments and using those moneys to improve cash flow, attempt to gain unfair competitive advantage. The Revenue Commissioners only resort to attachment orders in respect of taxpayers who purposely default in their payment obligations. The average number of attachment orders for the three-year period 2005 to 2007, was 2,269, in the context of 250,000 small enterprises.
The Revenue Commissioners’ consistent message to taxpayers who experience a problem in meeting their tax obligations is to contact Revenue at the earliest possible time to work towards resolving the issue, therefore avoiding the necessity of deploying collection enforcement measures. The specific question of attachment orders did not arise in recent discussions between the Tánaiste and ISME and the Small Firms Association.
Deputy Damien English: I am glad the Minister of State has attempted to answer it. I am shocked that he can tell me this issue was not raised at the meetings. We have business people and also ISME ringing us about this issue. The threat of attachment orders is preventing banks from giving overdrafts to certain businesses. I will explain the reason to the Ministers, if they regard this as complicated.
Deputy Damien English: It is not a different question. I am glad to see it only concerns 2,200. The Minister of State, Deputy McGuinness, has been in business and so he will understand the threat of attachment orders. If an attachment order is put on a business, the Revenue can step in and clear out that business account, including any overdraft facility. Therein lies the problem and it is another reason, along with many others, some of the banks will not give overdrafts. I ask the Minister of State to talk to the Minister about it and check it out to see if the arrangements can be changed.
The Minister of State referred to the payment of taxes to Revenue. It is a major issue when Revenue acts in a heavy handed manner and this is happening in the case of some businesses. Revenue is looking for the money too quickly. We are now in very different economic circumstances. The UK tax authorities seem to have recognised this and have put in place a special business and support service to deal with this situation. If businesses are under pressure making their repayments the UK authorities talk to them and arrange longer term payments with interest charged; it is not for free. They are doing something about it whereas I am being contacted by business people on a daily basis who are being put under pressure to make payments to the Revenue.
Deputy McGuinness is a Minister who can talk to the Department of Finance. Will he ask the Revenue Commissioners to show a little common sense? If somebody owes €60,000 or €80,000 to the Revenue, I agree he or she should pay it if possible but if the person goes bankrupt in the attempt this will cost the State much more this year and in future years, in terms of lost jobs and lost taxes. This would amount to a hell of a lot more than €60,000.
Will the Minister of State give this question some consideration? It is a reasonable question and it is down for a reason. I remind the Tánaiste and other Ministers that I do not make these things up. Our counterparts in other countries show a bit of leniency in these times and help business during economic hard times rather than putting pressure on them. The threat of these attachment orders is a very serious threat.
Deputy John McGuinness: I understand that but I must explain to the Deputy that when Revenue comes before the Committee of Public Accounts, one will not meet a better organisation for explaining itself. It has been explained many times to me as a businessman, to the Committee of Public Accounts and to everybody else in business, that if a person has difficulty with paying taxes, the Revenue does not just drop on one’s house overnight; it is normally a build-up over a period of time——
Deputy John McGuinness: I am not lecturing the Deputy. He has given his side of the story which is not completely accurate. If people engage with Revenue they can actually work their way out of the problem. I have found Revenue to be flexible within the framework when dealing with these situations.
On the question of attachment orders, a whole process leads up to the application of an attachment order. The company in question is written to and is engaged with by the Revenue which discusses the issue with the company. Revenue encourages the company or individual to settle before it ever becomes heavy handed. Even prior to the situation becoming, as the Deputy describes it, “a bit heavy handed”, an authorised senior manager must be engaged to apply the attachment order. The figures dating back to 2005 are roughly the same, ranging around 2,200. I know this is a difficult time for businesses in terms of meeting all their obligations but any company facing a difficulty with payment of taxes should, before it becomes serious, ask their accountants to contact the Revenue Commissioners and work their way out of it.
Deputy Damien English: I accept the explanation and I ask the Minister of State to accept mine as being bona fide. I did not invent it and it is a concern of ISME and of small businesses. Will the Ministers talk to the Minister for Finance and others to see if this is an issue. I agree with the Minister of State that the Revenue Commissioners are normally very reasonable and very easy to deal with when it comes to organising repayments. However, in recent months the situation is not the same as it was previously. Businesses are under enough pressure from everybody else and they do not need the authorities making life difficult for them.
Deputy Damien English: That is good. Will she please bear it in mind? I want our authorities to cut some slack to businesses that are genuinely trying. I have dealt with two or three already who are under immense pressure. ISME members are obviously feeling the heavy hand and I want the Minister to talk to that organisation. We are talking about the threat of attachment orders that can prevent a bank from making money available; we are not talking about the 2,000 in the past but rather the potential threat of it happening. This is a serious issue. I ask the Minister to give it some thought and to talk to the people involved.
Deputy John McGuinness: We explained our understandings. I understand the Deputy’s point. I met the Small Firms Association last week and this issue was not raised. I am not saying it is not an issue because I have had similar queries to my constituency office. I met the convenience store and newsagents association and this issue was not raised. However, I understand that it is an issue out there. I do not know the extent of the concern or the extent of the problem. I will undertake to ask the Revenue Commissioners and the Department of Finance about the specific issue the Deputy has raised.
67. Deputy Willie Penrose asked the Tánaiste and Minister for Enterprise, Trade and Employment if her attention has been drawn to the difficulties facing many small and medium sized companies as a result of their inability to secure credit from financial institutions and the consequent loss of jobs in this sector; the steps she has taken to address this problem; and if she will make a statement on the matter. [44885/08]
Minister of State at the Department of Enterprise, Trade and Employment (Deputy Jimmy Devins): I am very much aware of the difficulties facing small firms as a result of the current economic difficulties and in particular the importance of continuing access to bank credit facilities for sound projects.
The Tánaiste met the SFA and ISME on 19 November 2008, to discuss their concerns on a range of issues which have impacted on small business as a result of the credit crunch. These include access to credit from financial institutions.
While the banking sector is the responsibility of my colleague the Minister for Finance, Deputy Brian Lenihan, my Department has worked closely with the Minister and officials of his Department on encouraging the banks to assume their responsibility to provide support to economic development and to provide credit to SMEs in particular.
The Deputy will no doubt be aware that over the past week several Irish banks announced significant financial lending packages to assist SMEs. In addition, the European Investment Bank indicated it is in discussions with four Irish banks about its recently announced €30 billion loan facility to provide loans to SMEs through commercial banks. These important developments are to be welcomed.
My Department’s continuous support for indigenous companies is shown through maintaining a positive business environment and through particular interventions from the State development agencies such as Enterprise Ireland, FÁS and the county and city enterprise boards.
Enterprise Ireland is responsible for supporting the development of Irish companies with ambitions to grow in world markets. Many of its client companies are small to medium in size. Enterprise Ireland recognises the varied challenges facing such companies in the context of the changing economic environment and partners with companies to address their needs in a holistic manner.
Attractive BES and seed capital schemes contribute to the provision of capital investment across a range of small and medium-sized enterprises. In addition to this, Enterprise Ireland is directly involved in venture capital initiatives also attracting investment for businesses. As a result of the Government’s investment of €175 million channelled through Enterprise Ireland, seven new venture capital funds have raised over €500 million which is available to invest in the small and medium-sized enterprise sector.
Also funded through the Department, the 35 county and city enterprise boards provide support to small businesses or microenterprises with ten employees or fewer. County and city enterprise board funding will increase next year by almost €3 million, 9%, to €34.8 million, representing a further indication of the Government’s commitment to supporting this sector of business.
FÁS through its one step up programme is encouraging employees to increase their competency levels and promoting an ethos of lifelong learning in the workplace. Its key intervention in this regard is the competency development programme. It offers workers different types of training programmes directed at various skill levels across major economic sectors. These training programmes are available to employees of small and medium-sized enterprises. FÁS also has a number of other training programmes aimed at upskilling small and medium-sized enterprises, namely, Skillnets and the strategic alliance programme.
The Government has also made considerable progress on the implementation of the small business forum report’s recommendations. This progress is reflected through a substantial package of financial measures and schemes introduced to assist the sector over the past two years, including fiscal measures in the 2007 and 2008 Finance Acts.
Small and medium-sized enterprises are central to our economic development and the range of measures and supports outlined above will continue to help the sector adapt to the current economic climate. These measures will be kept under review to ensure that they remain appropriate to the current circumstances.
In our Department, we will continue to remain in regular contact with the Department of Finance and will ensure that the issue of availability of credit to small and medium-sized enterprises is kept under constant review. We will also continue to consult with ISME and SFA on all issues impacting on small businesses and we welcome their continued valuable input.
Deputy Willie Penrose: The Minister of State is aware that up to 250,000 small and medium-sized enterprises provide 800,000 jobs. While foreign direct investment is important for Ireland, small and medium-sized enterprises are the lifeblood of most areas, particularly rural areas. Is the Minister of State aware of people’s concerns of a significant drain on the retail sector that will take place after Christmas? I am talking about the real businesspeople who I meet in towns and villages.
In the past, banks lent irresponsibly to builders who now cannot pay. The banks are squeezing other borrowers relentlessly to increase their reserves. Viable small and medium-sized enterprises are threatened by the unwillingness of the banks to lend. It is not because these businesses are at a risk of failure, but because the banks are desperately trying to attract deposits rather than give loans. These are profitable small and medium-sized enterprises which do not have the money to pay creditors.
Is the Minister of State aware that some businesses are afraid to take on too many creditors in case they are charged with reckless trading. The Minister of State, Deputy McGuinness, would know of this. If a trader takes on credit and cannot pay for it down the line, he or she will have to answer questions somewhere else under company law. There is a great fear among small and medium-sized enterprises that they could be charged with reckless trading in such cases. That is why credit is important to them. They are profitable businesses but they will be squeezed out of existence.
Access to the €15 billion in funds from the European Investment Bank came into operation in September. It is now nearly Christmas, three months later, and the banks still have not tapped into this fund. Why? Has any Minister asked the banks why? Is it because the banks will not get enough in management and banking charges? Will the banks deprive small businesses of the opportunity of survival? The financial institutions guarantee was given by the Dáil. What was asked in return? That the banks would save our 250,000 small and medium-sized enterprise by ensuring enough liquidity and cash to go around for them to meet their day-to-day commitments. It is time for the Minister for Finance and the Tánaiste and Minister for Enterprise, Trade and Employment to call in the banks to tell them they have a role to play as active participants in getting us all over this economic hump.
Deputy Jimmy Devins: We are aware of the importance of the small and medium-sized enterprise sector to job creation, etc. The Tánaiste and the Department of Enterprise, Trade and Employment have met with the banks in the past two weeks and will be meeting with them over the next week or so. Over the past week, three banks have announced funding programmes for small and medium-sized enterprises.
The Deputy is correct that the fund from the European Investment Bank is €15 billion. We are expecting four of the banks, which are in discussion with the European Investment Bank, to announce packages in that line in the first quarter of 2009.
Deputy Willie Penrose: The Industrial Credit Corporation, established by the State in the 1930s, was of great assistance to small and medium-sized enterprises. The Government should establish a similar organisation if the banks do not tap into the European Investment Bank funds. Let the Government get into this money and tell the banks to stuff it if they do not play ball. It is about time they were told they cannot hold us to ransom.
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