An assessment of Ireland’s top 100 companies illustrates the value of a balanced economy, combining both multinational investment and a dynamic domestic sector, writes Shaun Murphy.
Ireland has, to a great extent, focused policy making on attracting large scale global businesses. This we have done remarkably successfully. Whilst there is no room for complacency in respect of inward investment, we need to do more to encourage domestic business and the entrepreneurs who lead them.
The benefits are obvious, not just in terms of balance, but also in jobs and tax revenues. On the positive side, there is no doubt that Ireland is doing better at building large businesses from scratch. There is less stigma attached to business failure and attitudes to entrepreneurship and risk have changed for the better. The most recent Global Entrepreneurship Monitor (GEM) report re-affirms this broad point and reveals that four out of five adults in Ireland have a high regard for successful entrepreneurs — second only to Finland in Europe.
Meanwhile, the structural supports for enterprise are highly developed. Enterprise Ireland and others are well regarded and driven to deliver for their client companies. Speaking at one of our recent KPMG briefings for domestically owned business, Julie Sinnamon, CEO of Enterprise Ireland noted: “The number of net jobs supported in client companies has an upward trend – Ireland is good at start-ups. However, we need to get better at building companies of scale.”
There are many reasons for this scaling challenge. These include a small domestic market and historically a relatively small number of role models in terms of globally known Irish companies.
So what can we do to drive a greater focus on the importance of domestic enterprise?
An obvious starting point is the issue of risk and reward. For instance, the Government has given a clear indication that the tax discrimination suffered by self-employed entrepreneurs will be eliminated in the next budget.
This is welcome news and I believe there is a strong argument for doing more. We need to be more proactive and demonstrate the same level of energy and support for domestic business as we do for FDI. Ultimately, this means making Ireland more attractive both to our own people and to outsiders looking for a place in which to build and grow a business.
As mentioned, the Government is committed to abolishing the higher USC rate for the self- employed. Consideration should also be given to extend the PAYE tax credit to self-employed. We are also obliged to pay attention to the tax treatment of entrepreneurs in neighbouring jurisdictions with whom we compete. For example our 33% rate of Capital Gains Tax (CGT) is disproportionately high by international standards. A suggested 12.5% capital gains tax for entrepreneurs on gains from trading assets and companies of up to €25m would make Ireland a far more attractive location for dynamic entrepreneurs with choices as to where they locate.
BRIDGING THE GENDER GAP
It is also important to highlight the role of women and gender. The previously mentioned GEM report examines the gender aspect of entrepreneurial activity in Ireland. The good news is that this gap continues to narrow as more women enter the entrepreneurial space. There are now 1.4 times as many men as women who are new business owners. Programmes such as the KPMG supported ‘Going for Growth’ initiative use the power of mentoring to encourage more women to start or strengthen their own businesses. With start-up businesses accounting for around two-thirds of new jobs created in Ireland in recent years, the need to continue fostering a spirit of entrepreneurship cannot be underestimated.
… there is no doubt that Ireland is doing better at building large businesses from scratch