A Digital Tax Credit Tops the Poll in Companies’ Pre-Budget 2021 Wishlist

Funding in the form of a digital tax credit to help businesses with their increased IT spend due to COVID-19, has emerged as the most impactful change the Government could make in Budget 2021, according to a new survey by the ACOI. The survey by the Association of Compliance Officers of Ireland of 300 of its members, many of whom are compliance leaders in large financial organisations around the country, found that 26% of those surveyed felt such a measure would be the most effective way the Government could help businesses. Greater access to credit came in at number two in the companies’ pre-Budget 2021 “wishlist”.

The ACOI survey asked:

1. The Government will have a role to play in helping businesses navigate their way through the COVID landscape for the foreseeable future. Which of the following do you believe would be the most impactful change the Government could make in Budget 2021?

• Introduce a digital tax credit for the many organisations that have had to greatly increase their tech presence/capacity etc due to COVID 26%

• Greater access to credit 21%

• A longer-term employee wage support scheme 19%

• Funding for training and retraining of staff within organisations 19%

• Simplify the process around Start Up Relief for Entrepreneurs (SURE) and promote the scheme to a greater extent 11%

• Relax rules around the Employment Investment Incentive Scheme (EIIS) 4%

Michael Kavanagh, CEO of ACOI, spoke of the findings,
“Many of our members, and indeed businesses around the country, have had to scale up their technical capacity and upgrade their IT resources for staff hugely as a result of the sudden shift from office to home-based working in response to the COVID-19 pandemic, and a cessation or at least alteration of face to face interaction with clients and customers. This has prompted the need for more hardware such as laptops and computers, for spending on increased online presence in terms of website development and customer service management, for greater amounts of online and cloud storage, and for increased investment in cyber security. Tax credits for much of these costs are spread over many years whereas the expenditure is immediate, and for many businesses they come at a particularly tough time. That members are calling on the Government to address this issue in the Budget and help them to fund these investments is unsurprising in the context of how much many have been forced to pay out.

The findings also show that providing greater access to credit is a big priority amongst businesses, with an additional 21% believing this measure to be the most impactful the Government could make. Businesses are facing their toughest time yet as we head into nationwide Level 3 restrictions. Those businesses that survived the first lockdown now have to endure a prolonged threat over the winter months, with the vital Christmas trading period looking increasingly bumpy given the tighter restriction on trade and movement. Businesses must be able to access the capital they need in order to stay afloat – if they can’t tap into vital credit to pay their rent, bills, or payroll - it could result in worker layoffs, closures, and even bankruptcy in some cases.

In this context, 19% of respondents believe that wage supports should remain over the longer term and 18% called for increased funding for training. Indeed, funding for training and upskilling will be important factors in considering how to support staff to work effectively within the new operational environment for business. Some people’s roles may have changed radically. A whole new level of compliance is also required which means more money and resources for staff training. Simplification of the rules surrounding the receipt of supports was desired by 11% of survey respondents, with 4% believing that a relaxation of EIIS rules would be the most effective option."

How to Promote Stability

The ACOI survey also asked:

2. What key measure do you think the Government should take in Budget 2021 to promote stability in the financial services sector/the economy?

• Incentives to encourage consumers to spend more 41%

• Further grants to struggling businesses 27%

• Cut personal taxes 23%

• Cut business taxes 4%

• Incentives for consumers to borrow more 4%

Mr. Kavanagh commented,
“When it comes to how we can even attempt to stabilise our economy, 41% of respondents to our survey called for the introduction of spending incentives for consumers. Stimulus policies in the form of spending incentives have been popular around the world in response to lockdown restrictions, with the aim of such measures being to stimulate the economy and get the flow of money going again by boosting the demand for goods and services. The Staycation tax credit is the only such incentive we’ve seen so far and while the first month will be a damp squib, it should make a meaningful difference when Level 3 restrictions are reduced.

27% would like to see more grants for struggling businesses. We’ve seen the Government come out strongly at several key points in the pandemic with supports for business such as the Wage Subsidy Scheme, the Credit Guarantee Scheme, and the provision of business loans with zero interest and repayments for 6 months. There have also been various funds and grant schemes for smaller enterprises such as the Enterprise Support Grant and Trading Online voucher. Interestingly, 23% say cuts to personal taxes would promote stability in the economy, with just 4% agreeing that business tax cuts, or the encouragement of consumer borrowing would be effective.”

A survey conducted by the ESRI in May of this year forecast that in a ‘new normal’ scenario, whereby consumer spending would return through the remainder of the year with ongoing physical distancing; household expenditure would be down 13% on 2019. In a ‘severe’ scenario, where a strict lockdown would be enforced for a 12-week period from October, the total fall in spending forecast would be 20% on 2019.

Mr. Kavanagh concluded,
“At present we seem to be somewhere in the middle of these two scenarios. However, the upshot will be the same and the underlying message from this report is that public spending will be down regardless. Assisting businesses through the provision of increased financial support measures, whether directly through credit facilities or indirectly through tax measures for businesses and/or consumers, will be vital to help get businesses through the winter. With much of our Christmas shopping likely to move online this year, investment in a digital presence is more pressing than ever, and our member survey highlights a clear call for greater assistance with that transition. Whatever measures are or are not introduced in Budget 2021, it certainly will be an important part of the roadmap ahead in mitigating the worst effects of this pandemic for the economy.”


The Echo

Media Links

TechCentral.ie - ACOI members call for ‘digital tax credit’ measures in budget

Irish Examiner - 26% of Irish businesses would like to see a 'digital tax credit' and assistance in going online

Irish Examiner - 54% of financial services firms want a 'cautionary' Budget

MSN.com - Compliance officers say Budget must be 'cautionary'

Independent.ie - Compliance officers say Budget must be 'cautionary'