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. Deputy McGrath made the comments following the launch of the Fianna Fáil submission to the Department of Finance consultation on tax and enterprise.
The paper sets out key priority areas including:
- Equal treatment for the self-employed in the PAYE system.
- Dismantling the barriers in the social protection code which discourage enterprise.
- Reform of commercial rates to make the system more responsive to the needs of struggling businesses and to encourage greater use of vacant sites.
Deputy McGrath commented “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.
There are a number of practical measures that we believe can be introduced which will support enterprise in Ireland.
1. Crowdfunding relief: There is a very vibrant start-up scene in Ireland. The energy and drive present in this sector has great potential to generate future economic growth, but we should nurture and expand this activity to other high-potential enterprises also. We have identified crowdfunding as one area of huge potential to meet the challenge of funding that start-ups face. Currently the interest on crowdfunding loans is subject to income tax, USC and PRSI as unearned income. To incentivise crowdfunding, We are proposing waiving the PRSI and USC on the interest on any such investment up to €20k. The interest earned would also be subject to tax at the standard rate of 20% rather than the investor’s marginal rate.
2. Capital Gains Tax incentive for entrepreneurs: There is a globally competitive market for start-up enterprises. We believe 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. This would be limited to relief on the first €5m of chargeable gains.
3. Progressive relief from Employers’ PRSI: Within the existing €1bn budget for job support, we believe resources should be reallocated to support a progressive relief from Employer PRSI. This would be linked to growth in employee headcount.
4. Support Family Business Succession: Capital Gains Tax retirement relief has seen significant restrictions imposed on the value that can transfer tax free from one generation to the next if the individual is aged 66 or older. The age limits do not reflect the reality that business owners will often need to retain ownership of their businesses until over 65 in order to ensure that the next generation has acquired the necessary experience to take on the business. We therefore propose that the 66 age limit in the above cases is raised to 72 to reflect the balance between encouraging business owners to pass on their business and the reality of the business environment over the last number of years.
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,” concluded Deputy McGrath.