SFA Budget 2016 priorities for a job-rich recovery

Monday, 17 August 2015

Unlock investment through reform of Capital Gains Tax
    End tax discrimination against the self-employed

    Reduce taxes on labour to ensure a job-rich recovery

      Launching the SFA’s pre-Budget 2016 submission today, AJ Noonan, SFA Chairman, said “The SFA has a vision of Ireland as the most vibrant small business community in the world, supporting entrepreneurship, valuing small business and rewarding risk takers. Budget 2016 presents an opportunity to take steps towards making this a reality.”

      “Budget 2016 comes at a time when Ireland’s economic outlook is relatively positive. For many, the fragility of the crisis years has passed, but the recovery has not been consistent regionally or sectorally. Many small businesses are still waiting to feel the upturn. This Budget is critical to ensuring that the recovery is felt across the country, throughout the economy and that its impact is sustainable and job-rich.”

      “Investment is a critical driver of growth but the current Capital Gains Tax (CGT) arrangements make it less attractive to sell a business and reinvest in the Irish economy. Ireland has one of the highest rates of CGT amongst developed economies at 33%. This puts Ireland at a competitive disadvantage when it comes to attracting and retaining mobile investment. The SFA is calling for a reduction in CGT to 20% across the board. History has shown that a lower rate of CGT substantially boosts the overall tax take, so the Exchequer will also benefit substantially by such a move,” continued Noonan.

      The SFA remains convinced that the current CGT Entrepreneurial Relief scheme is overly restrictive and will not work in its current format. The fact that the relief is given after the sale of a second successful business means in reality that it will take a decade before the entrepreneur will see any return and, in any event, the likelihood of having two successful start-ups in a row is questionable. The SFA proposes that this relief is amended to mirror the UK scheme, where CGT of 10% is due on the sale or closure of all or part of a business, on the condition that the entrepreneur has held the share for at least a year and is a director, partner or employee in the business.

      Noonan stated “The discrimination against self-employed people and proprietary directors in the tax system must be stopped. It is critical that there is at least equity in treatment between employees and proprietary directors/self-employed people if entrepreneurship in Ireland is to flourish. This can be done by ending the 3% USC surcharge that applies only to the self-employed; affording proprietary directors the PAYE tax credit if they pay tax on a PAYE basis; and introducing a voluntary PRSI contribution to allow entrepreneurs to have a social welfare safety net similar to their employees.”

      SFA members have identified reducing taxation on work as the most important thing the Government can do to boost their businesses. The SFA calls for the entry point to the marginal rate of income tax to be increased by €1,500 in 2016 for a single person with a corresponding increase for married couples and other tax cases. In addition, the SFA strongly advocates a 1% reduction in the marginal rate of income tax. Employer PRSI must be reviewed and the Government must ensure that the social welfare system never discourages people from taking up work, including part time work.

      “The SFA encourages the Government to expand the ‘fiscal envelope’ by the maximum €1.5 billion referred to in the Spring Economic Statement. Small business can lead the way in helping Ireland to continue to recover faster and stronger than others – but in order to do this, the Government must create an enabling environment by restoring a sound macroeconomic base, reducing the cost of doing business, boosting productivity, and ensuring the delivery of world class performance standards across our public service,” concluded Noonan.


      A full copy of the SFA’s pre-Budget 2016 submission is attached.

      For further comment and interviews, please contact AJ Noonan, SFA Chairman, on tel: 086 2592610.