78,600 small firms on debt cliff edge
Business owners urge Revenue to back off as a combination of tax notices and energy bills place them ‘under siege’
SMALL business leaders have warned Revenue that many of the country’s firms under threat from soaring energy costs will go under if they are pursued for debts ‘warehoused’ during the pandemic.
Restaurants Association of Ireland (RAI) chief executive Adrian Cummins urged the taxman to ‘back off’ from collecting debts owed under the warehousing scheme.
And Irish Small and Medium Enterprises (ISME) CEO Neil McDonnell this weekend gave a chilling assessment of the current economic climate, saying, ‘Anyone who is energy-intensive is not sustainable’.
Revenue is seeking to bring closure to the business loan scheme which, at its peak, put €31bn owed by 250,000 enterprises across the country into cold storage. This has now been reduced to €2.6bn, which is owned by just over 78,600 businesses.
Mr Cummins claimed Revenue was ‘ramping up’ attempts to claw back the money.
He told the Irish Mail on Sunday: ‘Revenue needs to back off the current ramping up of their approach to compliant taxpayers.
‘Small businesses and hospitality are facing very difficult times. They need support at this very uncertain juncture.
‘Businesses have had it very hard. After austerity and coronavirus, they are now under siege for the third time in a decade.’
Irish SMEs are defined as small firms that employ fewer than 250 people. They account for 99.8% of the total number of enterprises and employ 1.06 million people countrywide.
The Government this week announced a significant €1.25bn Temporary Business Energy Support Scheme (TBESS) to provide financial aid for businesses being hit with soaring energy costs.
The MoS has learned that another loan scheme was discussed preBudget with Enterprise Minister Leo Varadkar, but those proposals were quickly rejected by business representatives.
One source who attended the meeting said: ‘We had the conversation; loans were mentioned, and loans went down like a lead balloon. The Tánaiste knew fairly fast that this was out and that it wasn’t coming back.’
Mr Cummins also said another loan scheme was not sustainable.
‘Another series of loans makes absolutely no sense to our members. That point was made at every level of engagement from the Taoiseach to the Tánaiste, [and] the two finance ministers [Paschal Donohoe and Michael McGrath],’ he added.
Meanwhile, there is growing nervousness within Cabinet about the sustainability of the State’s record level of employment.
One minister told the MoS: ‘There is visible unease about the stability of those figures. [Former Taoiseach] Brian Cowen was going on about full employment the year before the crash too.
‘The Cabinet is desperate to not have SMEs falling off the edge. That is what is terrifying them. The problem is, where does the money come from? The current figures are good, but the accumulated debt is appalling.’
Another minister said: ‘Full employment is not as good as it sounds; it’s actually an ominous indicator that the economy is at full tilt, that it’s about to overheat. We had that in the last days of the [Celtic] Tiger too.
‘There is a growing sense of people saying or feeling it’s like 2007 and 2008 all over again.’
These concerns will be accelerated by the stark warning from small business leader Mr McDonnell that energy-intensive enterprises are not sustainable.
The ISME chief told the MoS: ‘The talk may be about cutting down on the use of energy but if you are a butcher or a shop owner selling frozen goods you can’t shut the chill zone down.
‘In this regard the concern is that the doors will shut.’
Mr McDonnell said the bulk of ISME’s recent inquiries relate to short-term working and redundancies.
He added: ‘That’s indicative of the mood. People have gone through the great recession, and they have gone through coronavirus. They are not going to face into this unsupported.
‘People are going to close the doors. The planning has started
‘Another series of loans makes no sense’
already. Practitioners will be more structured this time. ‘They won’t simply wait for the wolf to come. They are asking about voluntary liquidation.’
Mr McDonnell also expressed concern over the capacity of the country’s governing elite to guide energy-vulnerable businesses through a recession.
‘They are detached from reality. Top-level civil servant appointments are now 100% internal. There is no one with an understanding of enterprise,’ he said.
Mr McDonnell’s views were echoed by businesses at the coalface.
One small cafe owner said: ‘I’ve worked through a recession, through austerity and through coronavirus.
‘After all this all I have is hundreds of thousands of euro in debt. I am not going to pile on hundreds of thousands more.
‘Technically, I am already bankrupt. I am essentially trading as insolvent. I am not going to spend another year or two years increasing my debts. I will just shut the doors and walk away on my own terms.’
‘People are going to close the doors’
Another small business owner warned: ‘There will be a tsunami of people walking away from businesses if the only thing available is some form of loan. Anyone over the age of 50 will just fold their tent and go.’
In response to queries from the MoS, a Revenue spokesman said there is ‘no obligation’ on businesses to start repaying warehoused debt until next January, or May 2023 ‘for those entitled to the extension’.
The spokesman said: ‘Revenue will engage with all taxpayers who have debt to pay the debt in full at 0% if they have the capacity to do so or agree tailored arrangements appropriate to the individual business circumstances to deal with the debt.’ Revenue said cases in the latter bracket will benefit from a reduced interest rate of 3%.
The spokesman added: ‘Revenue has a strong track record of successfully working with individuals and businesses who engage early to resolve their payment difficulties.
‘In most cases, a mutually satisfactory solution is found without resorting to debt collection/enforcement sanctions.’