Independent Ireland Leader, Michael Collins TD, has called for a government aid package and a two-year extension to the deadline for warehousing of tax owed to Revenue. This call to action aims to provide Small and Medium Enterprises (SMEs), particularly within the hospitality sector, some much-needed breathing space, he said.
Warehousing of tax debt assists businesses who experienced cash-flow and trading difficulties during the COVID-19 pandemic. Under the scheme, you could defer paying some eligible tax liabilities until you were in a position financially to deal with the debt.
Collins said that over the last few months, it had become clear that the growing number of closures in the hospitality sector, as well as across many other industries, is not solely due to rising costs. “There is also an impending need for many of these businesses to come up with an estimated €1.75bn to repay warehoused tax debt,” he said.
“During the pandemic, businesses were rightly allowed to defer payment of tax liabilities, and some 60,000 availed of that. Nonetheless, these businesses are now forced to repay that deferred money to the exchequer by May 1 of this year, or at least have a payment schedule in place by then. That is why I am calling for a two-year extension,” he said referring to the warehousing of tax debt.
“Just 10% of the firms involved owe some 85% of that money, leading business consultants PwC to predict that many hundreds of businesses will go under as a result,” the West Cork TD added.
He said that the government’s role during the pandemic has played a part in creating difficulties.
“The government imposed Covid lockdowns, which were among the longest in Europe, severely impacted the Irish SME sector. We have been cautioning about an impending crisis since early 2021. For example, the €1.3bn Temporary Business Energy Support Scheme (TBESS) was so complex that only €200 million was utilized by SMEs, with the remainder reverting to the exchequer. It is evident that the government’s disjointed support needs to be enhanced, and SMEs, which are the backbone of the rural and regional economy, must receive tailored support on a case-by-case basis.”
Collins also highlighted the financial struggles of SMEs, saying “In addition to the tax warehouse issue, SMEs are grappling with higher operating costs, including financing debt costs due to the rising interest rate environment, which is significantly increasing overdraft and finance costs.”
“While everyone acknowledges the importance of tax payments, and no one condones tax evasion by individuals or businesses, the Government and the Revenue Commissioners must devise a strategy to keep businesses operational and safeguard jobs,” he said.
The Independent TD said that the Government is projected to have a tax surplus of approximately €65.2bn by 2027. “A portion of this could be utilized to support struggling businesses. With the hospitality, retail, and construction sectors all facing financial difficulties, it is time for the Government to address the issue in a manner that is timely, constructive, and acceptable to both the affected parties and the taxpayers at large,” he said.