A Budget for Entrepreneurs
Sep 3, 2018
By Emma Kerins, EU & International Affairs Manager
Entrepreneurs are the innovators and change-makers of industry and small businesses are the lifeblood of the Irish economy. In Budget 2019, Government must do more to encourage and support the self-employed and small businesses to grow and ensure that we are celebrating and encouraging job creators. More attention must be given to policies that support entrepreneurship and to programmes that ensure SMEs can recruit and retain staff. We must also ensure that the kinds of incentives and supports that are introduced support male and female entrepreneurs.
In our submission to the Department of Finance, ahead of Budget 2019, we called for a wide range of recommendations that will support SMEs, employers and start-ups around the country. In this post, we’ve listed our recommendations to Government on how Ireland can better support SMEs, innovators and entrepreneurs.
Chambers Ireland welcomed previous commitments by Government to deliver tax equity between PAYE workers and the self-employed, however this must now be delivered fully in Budget 2019.
- In this Budget cycle Government must, as previously committed, bring Earned Income Tax Credit for self-employed in line with the Employee Tax Credit. Following Budget 2018, the total earned income credit for self-employed individuals sits at €1,150 annually leaving a discrepancy of €500 with the Employee Tax Credit.
- Self-employed earners earning more than €100,000 are faced with an additional USC burden of 3% more than a PAYE worker earning the same amount of income. Government should introduce full equity in taxation between the self-employed and PAYE workers.
- Introduce a short-term tax credit on employer PRSI to enable microbusinesses to grow and increase employee numbers. If applied to businesses with less than 10 employees, the introduction of a 3-year tax credit on employer PRSI for each new hire would support microbusinesses to create jobs and enable them to grow.
Diversity in Entrepreneurship
According to a report by the Global Entrepreneurship Monitor on Ireland, a man is more than twice as likely as a woman to be an early stage entrepreneur. In addition, more than half of female entrepreneurs are focused entirely on the home market and have no markets overseas, while just one third of male entrepreneurs are similarly focused. We call on Government to support female entrepreneurs so that they start-up, scale-up and become more globally focused, in line with their male counterparts.
- We recommend that Government support state agencies to expand funds, such as the Competitive Start Fund, that offer targeted supports for female entrepreneurs to include a broader range of business models and sectors.
- We recommend that Government introduce additional supports to increase the provision of management training to advise female-led companies on scaling up their businesses.
- We recommend that Government support state agencies to provide training to female entrepreneurs on international trade and commit to increasing female participation in Irish overseas trade missions to access new markets
A Competitive Landscape
Ireland’s high rates of CGT are impeding entrepreneurship and competitiveness. Comparative data from the Tax Foundation shows Ireland had the 5th highest rate of capital gains tax in the OECD in 2016. The high rate of 33% remains in place and is potentially disincentivising investment in the economy and discouraging the release of underutilised assets such as land or property.
- We recommend that the Irish Capital Gains Tax rate of 33% be gradually reduced to be closer to the UK standard rates and to be more competitive against the UK CGT tax regime.
- We recommend increasing the lifetime limit of €1 million in qualifying capital gains under Entrepreneur’s Relief to €10 million to improve the attractiveness for repeat investors and to encourage increased investment in Irish business.
A Culture of Entrepreneurship
Strategic changes to the capital gains tax regime could encourage investment in Irish businesses and ensure support for entrepreneurs and innovative ideas in our economy. Chambers Ireland recommends CGT rollover relief to allow deferral of CGT where the proceeds of a sale are reinvested in an SME or business fund managed by a state enterprise agency. The aim of this initiative would be to encourage investment in Irish businesses and ensure that start-ups and scale-ups are able to access the finance needed to grow.
- We recommend that Government consider the introduction of a mechanism where entrepreneurs can apply for a “small business rollover”, like the Australian model, where an entrepreneur can apply for tax relief on the capital gain when reinvesting in an SME or new business.
To read our submission in full, download the Chambers Ireland Pre Budget Submission 2019