Fianna Fáil Finance spokesperson Michael McGrath has described a competitive tax environment as central to the party’s strategy to support enterprise and job creation. He also warned that Ireland was losing out on the high potential start-ups, particularly in the IT sector due our less favourable tax regime.
Deputy McGrath was speaking ahead of the Fianna Fáil parliamentary think in on Monday and Tuesday of next week when the party will discuss a range of issues including the economy and employment.
Deputy McGrath said Fianna Fáil is fully committed to addressing the income tax anomaly facing the self-employed and to a new special 15% capital gains tax rate for entrepreneurs. These are among the proposals included in Fianna Fáil’s submission to the Department of Finance’s public consultation on Tax and Entrepreneurship.
Deputy McGrath stated, “There is no shortage of individuals with good ideas for products and services that people would be willing to purchase, but often the obstacles in their way prove too great. Setting up your own business is a daunting undertaking, negotiating a minefield of regulatory and financial hurdles.
“In so far as possible, the tax system should treat people in an equitable manner. Self- employed people lose under the current regime because, while they receive the personal tax credit of €1,650, they cannot claim the PAYE tax credit – also worth €1,650 per annum. This has a particularly stark impact for lower income levels. For example, a self-employed single person on an income of €17,500 pays almost 6 times more tax and PRSI as an employee on the same income.
“There is a strong case for addressing the unfair treatment of self-employed people. This should be done by means of an earned income tax credit as suggested by the Commission on Taxation. The cost of this would be €450m per annum when fully introduced. We are proposing this be phased in over 3 years with an initial tax credit of €500 for the self-employed in 2016. Fianna Fáil also believes that, over the longer term, the 3% surcharge on high income self-employed persons should be phased out so as to equalise the application of the USC to PAYE and self-employed persons.”
Deputy McGrath also committed the party to improving the capital gains tax regime for entrepreneurs, adding “There is a globally competitive market for start-up enterprises. Fianna Fáil believes the current relief is excessively restrictive. Our proposal for a more general relief from CGT for entrepreneurial investors regardless of whether they invested in a new business. This would create a clear distinction between enterprise and passive investment. It would involve a lower rate of 15% CGT rate applying for people who establish and subsequently sell their own business.
“No single measure is likely to be a silver bullet but combination well targeted reforms will underpin the strengths that exist within our current tax regime and enhance it further to ensure we retain our pre-eminent position as a location for mobile investment.
“Personal taxation is also important to a vibrant economy as companies need to be able to attract and retain high skilled employees. As well as the measures outlined today we will publish a package of personal tax related proposals in the run-up to the budget.”