Public consultation on Tax and Entrepreneurship
The public consultation on tax and entrepreneurship closed on 14 July 2015 and Deloitte were pleased to provide our insights to the Government on this important topic.
We have suggested the following bold moves as part of our recommendations:
• 20 per cent tax rate on certain dividends: A 20 per cent tax rate should be provided on dividends, subject to a €100,000 per annum limit once the business has been in existence for five years, which would: (a) encourage entrepreneurs to grow their business for five years; and (b) retain cash for re-investment in the company during this start-up period
• Capital Gains Tax (CGT) Tapering Relief: With a view to designing a tax system that encourages individuals to stay in business for longer, CGT tapering relief should be introduced for individuals who have worked full time in the business for over five years, as follows:
- 0 – 5 years – 33 per cent rate of CGT
- 5 – 10 years – 16.5 per cent rate of CGT
- 10 years and over – 8.25 per cent rate of CGT.
This relief would encourage entrepreneurs to ‘stay the course’ and scale their business internationally thus creating a better prospect of replicating the Kerry, CRH and Glanbia success stories
• 100 per cent rollover relief to be provided for entrepreneurs that exit the business earlier, but who re-invest 75 per cent of the proceeds in shares in another trading company, the disposal of which would be within the CGT charge
• Tax-Efficient Financing Arrangement: We recommend that a loan finance arrangement be introduced whereby individuals can lend money to SMEs and, provided certain safeguards are in place, for example, market interest rates are applied. Then, the individual will be taxed on the coupon received at the standard rate of income tax (i.e. 20 per cent) as opposed to the marginal rate of income tax (i.e. up to 55 per cent)
• Removal of Employed v Self Employed Disparity: A self-employed person with before-tax profits of less than the industrial wage for the year of assessment (€35,768 for 2014) should be granted a self-employed credit of the same amount as the PAYE credit that the individual would have been entitled to had they been in a PAYE employment.
Pádraig Cronin, Vice-Chairman and Tax Partner at Deloitte said, “We need to ensure that entrepreneurs are no longer over taxed and underappreciated. These recommendations are designed to enable Ireland to offer entrepreneurs a truly competitive tax environment in which they can expand and contribute to a strong indigenous Irish sector.”