10 things businesses want from Budget 2016
One of the biggest issues small businesses want to see addressed in this year’s budget is the lack of early stage funding. The key policy change put forward by the startup community in that regard is the establishment of a Seed Enterprise Investment Scheme (SEIS) that could unlock up to €100m of funding and open the investment circle up to a far wider array of people.
The proposed scheme would work along the lines of that currently operating in the UK which offers income tax relief of 50% on investments in startups of up to £100,000 (€140,000), as well as 50% capital gains tax relief if assets are reinvested in an SEIS qualifying company.
Businesses argue the current capital gains tax system is flawed and hinders investment. Budget 2013 saw the rate increased from 30% to 33% but bodies such as the Irish Small and Medium Sized Enterprises Association (ISME) are now calling for that rate to be cut to 20%.
Additionally, businesses are looking for the reintroduction of ‘roll-over relief’ which allowed businesses to defer capital gains tax when the proceeds of a sale of business assets were reinvested in other business assets.
Fuel and drink tax hikes ruled out for budget, via @Junomaco & @Ocionnaith http://t.co/TygjR6iiyG (GM) pic.twitter.com/1scHjJhneA
— Irish Examiner (@irishexaminer) October 8, 2015
Changes are also being sought to capital gains tax relief for entrepreneurs which critics argue is prohibitive given it is only applicable where an entrepreneur makes two consecutive successful investments. A significantly revised and simpler ‘entrepreneur relief’ is what is being sought.
Startups often find it difficult to compete with large multinationals for talent given the resources available to bigger companies. One possible way of levelling the playing field is offering employees share options in the company as an additional sweetener to the smaller salaries they are likely to be offered.
Share options in this country trigger immediate tax liabilities, however, meaning such options are hardly ever used. Taxing share options when they are dispensed of could make a big difference.
Uncertainty has clouded businesses’ plans since the Low Pay Commission recommended an increase in the minimum wage from €8.65 to €9.15 an hour, in July. Ibec, among others, is critical of the recommendation which it says will put pressure on businesses already struggling with costs.
Kenny: Overall tax burden will be brought below 50% in next week's budget http://t.co/iIweOF0gs8 (GM) pic.twitter.com/o3z1VLZUnp
— Irish Examiner (@irishexaminer) October 8, 2015
While many favour a rejection of the commission’s proposal, every business owner will be hoping the budget at least offers clarity so they can plan ahead with a degree of certainty.
The corporation, which was established to provide much-needed credit to SMEs at cheaper rates than traditional lending, has been operational since March. The €500m fund which is financed by the Jobs Department; the European Investment Bank; and German bank, KfW is available through AIB and Bank of Ireland. The plan is to open the scheme to other lenders to broaden the range of offers in the market — another move businesses want.
As it stands, businesses pay 10.75% PRSI on each new staff member they hire regardless of the size of the firm. Business organisations such as Dublin Chamber are pushing for this tax to be waived for micro business employing up to nine people for three years to make it more attractive for firms to create employment. This could create 80,000 additional jobs at no net cost to the exchequer they argue.
Proponents of reducing the bankruptcy period from three years to one argue doing so would help create a culture of entrepreneurship and risk-taking that is needed to drive economic growth and job creation.
The issue has been a hot topic this year with, an Oireachtas Committee recommending in July that the period be cut to 12 months. Labour appear to be on board but Fine Gael TDs seem less enthusiastic.
After announcing the abolition of the “Double Irish” tax arrangement in last October’s budget, Finance Minister Michael Noonan unveiled plans for a ‘Knowledge Box’ which would see a 6.5% corporate tax rate applied to research and development activity.
Final talks under way on childcare supports in budget, via @Junomaco http://t.co/AhZLgZGaxB (GM) pic.twitter.com/qCxs8NBqdZ
— Irish Examiner (@irishexaminer) October 7, 2015
Following the OECD’s report earlier this week on multinationals’ tax arrangements, Mr Noonan said that the new taxation arrangement would comply with requirements set out in the report. The proposal was roundly welcomed last year by representative bodies and further detail will be made available.
Since its 2004 introduction the R&D regime has been improved on numerous occasions and businesses are looking for similar improvements this time around. The abolition of the base year from the beginning of this year was a welcome announcement, for example.
Still, greater clarity is needed for small businesses looking to avail of the incentive and calls have been made to increase the timeframe for submitting claims from two years to five.
Startup relief for entrepreneurs offers tax relief for people who invest in companies within the Employment and Investment Incentive Scheme but take-up is low with just 65 companies participating in 2013.
A range of improvements including removing the condition that the individual must have employment income in the previous year; extending the period in which he/ she must become a full-time director or employee of the company to a year; and increasing the maximum relief per annum by €50,000 to €150,000 have been suggested.
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