Shay Brennan urges digital strategy for SMEs, backs assessment

So, Minister, according to the European Commission, only 34% of Irish SMEs have achieved an advanced level of digital intensity, and just to define advanced level, that means they're substantially using artificial intelligence, data analytics, or sophisticated cloud computing. Further to that, the ESRI has noted that just 39% of Irish SMEs are currently investing. In digital transition in any way. So, that's a concerning gap, and one that's only going to grow as technologies such as AI, automation, and data-driven systems become more prevalent, and indeed more integral to competitiveness. So, we need to equip our SMEs to adapt, otherwise we risk eroding productivity, obviously export capacity, long-term resilience, all of that stuff. And that's what this amendment is doing, it's seeking to encourage an assessment of what new measures can be brought in to accelerate the digital transition. And for example, one option would be accelerated capital allowances. So, you know, allowing companies to write off 100% of qualifying expenditure in year one, rather than over eight years. And I know we do that in a number of other areas. That can be applied to AI, cybersecurity, digital infrastructure, infrastructure, and even staff upskilling. Another potential option would be maybe the expansion of the R&D tax credit, and I know we spoke about that earlier on. But to extend that beyond areas of pure research, but to apply it to areas that might involve adopting and integrating new technologies that would improve business models and processes. In fact, I note yesterday's Future 40 report stressed the need to increase productivity within the economy. An obvious way to do this would be by supporting investments in the likes of AI, cloud systems, cybersecurity, etc. So I've left the amendments deliberately not prescriptive. I'm just asking that we assess the best options going forward. Thanks very much Geoffrey for raising this. And you're right, the digital transition, particularly for small and medium sized businesses, is going to be increasingly important in the years ahead. We just talked there a few moments ago regarding what that means for the way people invest their money. We know it's transforming every part of our economy. And we also know that some of the costs that are involved in relation to this for small or medium sized businesses can sometimes be very challenging. In terms of the tax code and what we are doing with regard to that, I'd highlight a number of different schemes that are in place to support businesses on it. Firstly, for example, we have the angel investor release scheme. We have accelerated capital allowances, for example, with regard to energy efficient equipment, though I know that relates more to the green transition than obviously it does to the digital transition. And then most importantly, we have the R&D tax credit available, which we just spent some time earlier on this evening discussing. With regard to the R&D tax credit, which is the part of our tax code that makes the biggest difference to research and innovation within companies, we are going to be bringing forward some of the R&D compass, which will look at issues in relation to the direction of the R&D tax credit in the future, and the role that it can play in research and innovation within businesses. So I'm conscious as I say this to you, you are referring to something that's a little different as well. You're not just referring to the research and developments that companies make engaging. You're referring to how digital technologies can change the very way companies themselves operate. What they sell. How they sell. Not just what they sell. How the company is structured. How people use technology. And that is different to research and development. It's other things. And, you know, with regard to that, I do know, for example, this is something the LEOs, the local enterprise offices, do try to support local businesses on. And I know over a number of years, different grants and vouchers were made available from LEOs to businesses to assist in the digital transition. And I do think that's the most effective way in which we can support the kind of change that businesses need to make. So for all those reasons, and more generally, because I don't think legislation is the place in which we should commit ourselves to doing reports, that I'm not going to be able to accept your commitment, your amendment here this evening. But I can assure you that this is an area that our enterprise offices, I know, are going to continue to prioritize, because of the scale of change now that businesses have to make. How are you? Mr. Minister, at the outset there you described a number of initiatives, you basically repeated back to me what I kind of said. We need to focus on with a specific digital perspective. that particular angle and I think we do need to get serious about a strategy in this space. I was at a conference yesterday in Europe and the host of the conference summed up, listed each European EU member state and listed what they're known for in one word, in what tech space they're known for and for example Austria biotech, Cyprus fintech, Ireland's got cloud computing. Now that's important, of course it is, but I don't know if that's technologically at the cutting edge, that's more a service. So I think if we are to get serious about future productivity and you know particularly in light of the drag report and playing our part in that, I think we do need to have a defined strategy on it and I appreciate it doesn't necessarily need to come solely from the tax perspective, it does need to be more holistic and really the point of me bringing this is to put that on the agenda and just make sure that it's something that does not get dropped by the wayside. I'm not going to push the amendment, I'm just happy to highlight it and just to stress that we do need to come back to this again and again. Yeah I agree with that.