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Ibec Publishes Irish Budget Wish List

by Jason Gorringe, Tax-news.com, London

24 July 2017


Business group Ibec has said that the Irish Government must "Brexit proof" its 2018 Budget, improve its foreign direct investment model, and implement a range of tax reforms to compete with the UK.

Publishing the group's pre-Budget submission, Ibec Director of Policy and Public Affairs, Fergal O'Brien said: "The Irish economy is at a critical juncture. While it continues to grow strongly, we are also entering a period of uncertainty due to international external pressures from Brexit, and risks to global trade and investment." He added that governments have failed to invest sufficiently in domestic infrastructure and education.

On the tax front, the submission noted that the OECD's base erosion and profit shifting (BEPS) project "represents the single biggest change in the global corporate tax system in living memory." In addition, Ibec said that the European Commission is attempting to revive plans for a common consolidated corporation tax base (CCCTB), while the US is seeking to cut its corporation tax rate.

Ibec said that Ireland's tax system for SMEs must match or better the UK's. The submission explained: "The need to improve the taxation environment for small businesses has become even more important in the context of Brexit. In the past, only FDI was contestable – that has now changed."

"A central threat to the Irish indigenous business base is that of Irish companies moving to the UK in order to keep a foothold in their major market. This threat has been heightened by the fact that those companies would receive more favorable treatment when it comes to capital gains, investment taxes, and the tax treatment of share-options in the UK."

Ibec recommended that the Government:

  • Improve the capital gains tax (CGT) entrepreneurs' relief by increasing the lifetime cap on gains from EUR1m (USD1.2m) to EUR15m;
  • Introduce a preliminary version of an Seed Enterprise Investment Scheme, similar to that in the UK;
  • Introduce a simplified research and development (R&D) tax credit, to help smaller firms better overcome funding constraints;
  • Review the stamp duty treatment of shares in Irish-owned companies;
  • Introduce an enterprise management incentive scheme for smaller firms;
  • Re-commit to the 12.5 percent corporate tax rate;
  • Review the operation of the Knowledge Development Box to ensure it remains "best in class";
  • Support the full implementation of the OECD BEPS process;
  • Increase the entry point to the 40 percent rate of income tax by EUR1,000;
  • Remove Universal Social Charge and Pay Related Social Insurance liabilities on revenue approved stock option schemes, and reduce the income tax liability of unapproved schemes to the ordinary rate of tax;
  • Reduce the higher marginal rate of tax for those earning over EUR70,000 by one percent, and commit to reducing the all-in marginal rate for all employees to 47 percent;
  • Roll-back on implementation of the new tax on sugar-sweetened drinks;
  • Reduce alcohol excise by 3.5 percent across the board, with no level increases to other excises such as fuel or tobacco; and
  • Retain existing VAT rates.

The pre-Budget submission also stressed that the UK's withdrawal from the EU leaves the Irish economy exposed, particularly the sectors most reliant on the UK market. Ibec argued that the Government should put in place a multi-annual framework for funding "Brexit mitigation," targeted at supporting innovation, market diversification, upskilling, and capital expenditure in equipment and machinery.

It estimated that the resources required "will be in the region of five percent of the value of current export sales to the UK by Irish indigenous firms, or about EUR1.2bn over three years."

Ibec additionally recommended that the Government introduce trade support measures, including export financing and export credit guarantees, and retain the nine percent VAT tourism rate to keep Ireland competitive with other European destinations.

TAGS: capital gains tax (CGT) | VAT rates | tax | investment | small business | business | European Commission | Ireland | entrepreneurs | employees | corporation tax | United Kingdom | education | stamp duty | United States | tax reform | trade | European Union (EU) | research and development | Europe | BEPS

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