Institute Budget 2014 Submission

16 July 2013

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:

  • Increase of 65% in the capital gains tax (CGT) and capital acquisitions tax rates.
  • Increase of close to 20% in marginal income tax rates.
  • Abolition or restriction of reliefs and incentives previously available to investors.
  • 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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