Fianna Fáil has committed to a radical reform of the way in which successful entrepreneurs are taxed when they sell their business.
The party’s manifesto will include a pledge to match and beat the UK’s Entrepreneurs’ Tax Relief.
Finance spokesperson Michael McGrath commented, “There is a vibrant start-up scene in Ireland with bootcamps and incubators, particularly in the technology sector. Fianna Fáil wants to nurture and expand this activity to the maximum extent possible. The energy and drive present in this sector has great potential to generate future economic growth. Our aim is to establish Ireland as a world leading start-up location in a globally competitive market for start-up enterprises.
“A competitive tax regime is essential in this regard. Unfortunately we have slipped behind the UK in recent years.
“The extension of Capital Gains Tax relief in budget 2016 was restricted to the first €1 million of gains. It remains an extremely complicated system. In contrast the UK has a simpler, clearer and more attractive relief which applies a flat 10% rate to entrepreneurial gains of up to Stg £10 million. This limit has increased three fold since the relief was introduced.
“The rate of CGT in Ireland has increased four times since late 2008. The increase in Budget 2009 was the first rate change since Budget 1998 when the rate was decreased from 40% to 20%. The rate of CGT has been increased by 65% in less than 5 years.
“Notwithstanding the increase in rates, there is little or no evidence of commensurate increases in yield. For example, the increase from 30% to 33% introduced in Budget 2013 in respect of disposals made after 5 December 2012 was expected to yield an additional €50m in 2013. Revenue actually fell by €48m from 2012 to 2013. Total capital gains tax receipts in 2014 amounted to €541 million, just 1.3% of the overall exchequer tax receipts.
“We believe a bold policy measure in relation to capital gains tax does not pose a significant risk to the public finances. Fianna Fáil will cut the Capital Gains tax rate for entrepreneurs to 10% on the first €15 million of gains. The Department of Finance has provided us with an estimate that this would cost €74 million in a full year and we will fully provide for this in our manifesto.
“In reality the actual loss of revenue would be far less. Indeed from the 1998 cut to capital gains tax indicates that it will generate economic activity and raise overall revenue,” concluded Deputy McGrath.