Budget 2014 Submission –
Developing a Culture of Entrepreneurship
Dear
The Institute has just published its Budget 2014 Submission, which is focused on the development of a culture of enterprise and entrepreneurship in Ireland.
For potential entrepreneurs and investors, a key consideration is the tax environment in which they operate, invest and build their business.
Tax issues for entrepreneurship – Institute concerns
The tax environment for entrepreneurs in Ireland has steadily deteriorated over the last five years.
The key issues are:
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Increase of 65% in the capital gains tax (CGT) and capital acquisitions tax rates.
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Increase of close to 20% in marginal income tax rates.
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Abolition or restriction of reliefs and incentives previously available to investors.
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How our tax environment compares to other countries, especially given our proximity to the UK/Northern Ireland.
Key recommendations in our submission
In light of the competitive challenges presented elsewhere, we believe that our highly-mobile investors should be given every possible encouragement to put their wealth to work in generating enterprise and employment in Ireland.
We have put forward a number of key recommendations to address these issues and restore the incentive to build businesses and create jobs in Ireland:
1. Improve the tax environment for investors and entrepreneurs and address the
CGT and income tax issues currently facing this sector:
(a) CGT: We recommend that a reduced CGT rate of at least half the current rate of
33% be introduced for gains realised on the disposal of business assets and
shares in active trading companies. The relief should be contingent on and
linked to employment growth in the company.
(b) Income tax: Introduce a package of income tax measures to make the system
more conducive to self-employment and investment, including the following
elements:
1. Commit to ending the 3% additional Universal Social Charge on non-PAYE
income in excess of €100,000 at the end of 2014, as planned.
2. Remove the Employment and Investment Incentive relief from the scope of
the High Earners’ Restriction, and review the incentive’s restrictive 3-year
investment timeframe.
3. Consider amending the operation of the Seed Capital Relief so that the tax
relief helps to finance the qualifying investment, reducing the need for the
investor to raise all of the investment capital before they can make the
investment.
4. Introduce a tax relief for individuals making loan capital investments into high
potential SMEs.
2. Take measures to assist entrepreneurs’ underlying businesses and to incentivise
them to hire additional employees:
(a) Employer PRSI: Incentivise businesses which take on staff and continue to
build their workforce by introducing a progressive Employer PRSI relief which
reduces the Employer PRSI liability incrementally for each additional hire. For
ease of administration, we propose that the relief could be granted as a refund
at year-end.
(b) Commercial rates: Consider introducing a system of reduced commercial rates
targeted at small businesses with low turnover – the ones most adversely affected in the current economic climate.
3. Employee incentives: There are currently no employee equity incentives which are
geared towards start-ups and SMEs in Ireland and we believe it would be worth
considering introducing an equity incentive geared towards employees in this
sector.
4. Ambitious DDI strategy: Complement our successful strategy for attracting
foreign direct investment (FDI) with an ambitious domestic direct investment (DDI)
policy,which would address the broad fiscal climate for DDI, and identify clear
targets for the medium and longer term.
September – presentation to Oireachtas Committee
Representatives from the Institute will be presenting our Budget 2014 proposals to the Jobs, Enterprise and Innovation Committee of the Oireachtas in September.
In the lead-up to October’s Budget, we will continue to engage with Department of Finance officials and members of the Oireachtas to ensure that members’ concerns and proposals are conveyed.
The full text of our Budget 2014 submission is on our website and full coverage of all currently available information on Budget 2014 can be found on our dedicated webpage.
Kind regards
Cora O’Brien
Director
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