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Irish Chambers Call For Income Tax Reform

by Jason Gorringe,, London

03 August 2017

The Irish Chambers of Commerce have called on the Government to lower the tax burden on the self-employed and to commit to a review of the income tax system.

In its pre-Budget submission, Chambers Ireland said that a combination of a narrow base and high effective tax rates is "a serious threat to Ireland's overall competitiveness and in particular negatively affects our ability to compete with the UK in the attraction and retention of skilled workers."

The submission argued that, in the immediate term, the Government should commit to reducing the marginal tax rate for the self-employed to below 50 percent. It criticized the three percent Universal Social Charge (USC) surcharge on self-employed incomes over EUR100,000 (USD116,946), and said that the Government should "introduce full equity in taxation between the self-employed and PAYE workers."

In particular, Chambers Ireland would like the Government to bring the Earned Income Tax Credit for the self-employed in line with the PAYE Tax Credit, and to introduce an opt-in Pay Related Social Insurance (PRSI) system for the self-employed and owner-directors. It said the Government should also introduce a short-term tax credit on employer PRSI to enable micro enterprises to employ an additional staff member.

In the medium term, the submission recommended that the Government "commit to implementing a roadmap for the review of the levying of income tax … and put a plan in place over several budgets to review the entry point to the higher rate of tax."

The submission also noted that Ireland's standard rates of capital gains tax (CGT) are significantly higher than the UK's. "In the context of Brexit and the ever-growing need for Irish tax rates to be competitive when compared to the UK, it is time for Ireland to review CGT rates and assess where improvements can be made," it said.

According to Chambers Ireland, the Government should gradually reduce the Irish CGT rate of 33 percent to bring it closer to the UK's standard rates, and should increase the lifetime limit of qualifying gains under the Entrepreneur's Relief from EUR1m to EUR10m.

The submission also made the following tax-related recommendations:

  • The three percent Vacant Site Levy should be brought forward from January 2019 to January 2018;
  • The Local Property Tax (LPT) should be doubled on properties vacant for two years;
  • The Government should consider in the long term the development of a land tax that is based on the value of a parcel of land, which would replace the LPT;
  • The special nine percent value-added tax rate for the tourism industry should be retained; and
  • The Government should deliver on its commitment to introduce a tax-efficient employee share ownership scheme tailored to the needs of SMEs.

TAGS: capital gains tax (CGT) | tax | value added tax (VAT) | Ireland | property tax | tax incentives | commerce | budget | United Kingdom | tax thresholds | tax credits | tax rates | social security | tax reform | chamber of commerce | individual income tax | European Union (EU) | Europe

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