CGT reform ‘must follow business-friendly package’

Real reform on capital gains tax for entrepreneurs in next October’s budget needs to be one of the follow-on policies from yesterday’s package of programmes, which were broadly viewed as being friendly to the small business community.

Backing up his claim that SMEs were the lifeblood of the economy, Michael Noonan touched on a range of initiatives for the sector yesterday, including a re-launch of the disappointing Seed Capital scheme, to be renamed the Start-Up Relief for Entrepreneurs scheme; improvements to the remit of the Credit Review Office (which will soon see loans by Permanent TSB and potentially, Ulster Bank qualify for review); improving the Foreign Earnings Deduction; and the imminent launch of the Strategic Banking Corporation of Ireland, the State’s new so-called SME Bank.

Importantly, the three-year corporation tax relief for start-up firms is to be extended, and improvements have been made to the Employment and Investment Incentive Scheme (EIIS), increasing the amount of finance that a company can raise to €5m per annum, subject to a lifetime cap of €15m.

“The improvements announced to the EIIS should assist small businesses by making it more attractive for private investors to invest in small indigenous business and get a tax write-off,” said Small Firms Association (SFA) chairman, AJ Noonan.

“Banks now demand 30% equity investment before they grant approvals for small business loans, so this measure is critical.”

While welcoming much from Budget 2015, saying the major tax changes would help incentivise work, boost disposable income and strengthen SMEs, the SFA has also challenged the Government to be even more radical in promoting growth in Budget 2016 next October — with a particular focus on capital gains tax (CGT) for entrepreneurs.

“We look forward to engaging with Government on the promised development of the Integrated Export Finance Strategy, which is a major gap currently in our financing toolkit,” said Mr Noonan.

Rival organisation, ISME also welcomed swathes of yesterday’s budget statement, but said it still discriminated against self-employed entrepreneurs, by taxing them at a higher rate.

ISME chief executive Mark Fielding, however, said that the real danger coming from this budget is that any focus on eliminating public sector efficiencies will disappear “when government departments know additional funding is available.”