If you watched Enda Kenny’s state of the nation address on RTE last night, you’ll have guessed that the omens for tomorrow’s budget aren’t good.  

That’s not good news for SMEs in Ireland who are struggling as it is. There’s a lot of trepidation among SMEs come Budget Day because they can never quite see how a budget is going to be of benefit to them. Quite the opposite in fact – most businesses are preparing themselves for higher taxes and higher costs of running their business.

However, it is crucial to the wider economy that the SME market is protected as much as possible. That is not to say of course that small business owners shouldn’t pay their way – but in previous budgets, the focus has been on ensuring larger corporations and multinationals are continually persuaded to do business here, while the export market and high potential start-ups have been akin to the firstborn come budget time. While both are certainly important, the playing field has been anything but level when it comes to promoting SMEs and the local indigenous market. Indeed, after the public sector, the SME community is the largest employer in Ireland but yet suffers disproportionately at this time of year.

To help, Minister Noonan must tackle the problem of job creation and the willingness of people to take up positions when they become available. As it stands, an employer must offer a high base salary to attract the right individuals to their company because with social welfare rates as they are, potential employees will compare their after-tax income with their welfare entitlements. If there is little or no difference, then there is hardly an incentive for an individual to work.

Previous budgets have provided some incentives for employers to recruit new staff – the reduced PRSI rate for employees on a low salary is one that comes to mind. However, rarely do these measures carry any weight as stand-alone motivations – there needs to be a more coordinated and joined up approach. We need to work harder to develop a more creative strategy that will allow employers to take more people on. Simply cutting spending and raising taxes won’t work any longer – in fact, there is nothing more that can be achieved in creating employment in the SME sector by increasing taxes any further.

SME should be allowed to put themselves in a position whereby they can earn as much profit as possible – contrarily, what is happening with the new tax system, the Government is making it less attractive to go beyond a certain level of earnings for self-employed people. It is almost impossible to incentivise a business owner to invest in and expand their business if the profits that arise from that expansion are taxed at 50%. It is very difficult for an SME to justify moving to that level. While I understand the challenges facing the Government in terms of cutting costs, they have gone as far as they can go when it comes to increasing taxes for individuals – after all, any further hikes will damage their overall objective, which they say, is job creation.

Tomorrow will tell us a lot about how this Government really views the SME sector here and whether or not job creation is at the heart of a revival plan for Ireland.

Declan Dolan.

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