Serious concerns have been expressed by Irish business organisations over an EU directive to combat late payment in commercial transactions. The Department of Enterprise, Trade and Employment yesterday issued a consultative document inviting views on the directive, known as 2000/35/EC.
Existing prompt payment legislation applies only to public sector bodies. The legislation to implement the new directive will apply to all sectors of the economy and to all enterprises involved in commercial transactions, the Department said.
Under existing legislation, suppliers to public bodies have an automatic entitlement to be paid interest on amounts due but not paid on time. It is proposed to retain this element when the new legislation is enacted and to change the method of calculating the interest rate.
One of the most contentious elements is the changing of the prescribed payment date from 45 days after receipt of an invoice to 30 days.
"The limitation of 30 days is too short," said Mr Pat Delany, director of the Small Firms Association. "The average in Ireland at the moment is between 55 and 57 days. Thirty days is far too short for manufacturing companies which have work in progress way beyond that."
Mr Delany said the directive would require changes to the Irish Courts Bill in order to provide the proper framework for enforcement of the legislation. "We're not happy that we have the legal system necessary to enforce this. For a number of years now, we've been looking for the introduction of a small claims court for businesses. I think policing of this piece of legislation will require a change to the Courts Bill and the system because access to the courts is quite lengthy and expensive," he said.
Mr Delany also described the interest penalty, which he said was the EU Central Bank rate plus at least 7 per cent, as excessive. The directive failed to take account of the current difficulties associated with late payment in Ireland where almost 70 per cent of small firms offer credit terms of 30 days or less, yet only 8 per cent are paid within that time, he said.
"While there is significant support for the principle of getting paid on time, the Irish model would have been better able to cope with a period of 45 days. Once again, in our efforts to be good Europeans, we have allowed our competitors to set the pace which we must follow." Companies wishing to do business should set their own terms of agreement, Mr Delany said.
ISME head of research Mr Jim Curran also favoured a payment date from 45 days, and said the current legislation would result in higher costs.
