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Irish Self-Employment Tax Relief Sought

by Jason Gorringe, Tax-news.com, London

28 August 2017


Ireland's Small Firms Association (SFA) has called on the Government to lower the tax burden on entrepreneurs and the self-employed in October's Budget.

The SFA's pre-Budget submission made four key recommendations. It said that the Government should prioritize policies that would create the biggest impact with the resources available.

In the first instance, the SFA would like the Government to increase the self-employed Earned Income Tax Credit to the same level as the PAYE tax credit.

SFA Chair Sue O'Neil said: "Government policy continues to discriminate against the self-employed. The gap between the self-employed Earned Income Tax Credit (EUR950 (USD1,133)) and the PAYE tax credit (EUR1,650) means that entrepreneurs and owner-managers pay more tax than employees on the same gross income."

According to the SFA, this has the biggest impact on those on low incomes, putting business owners at a disadvantage in the early stages of their venture, and discouraging entrepreneurs from setting up their own business. The SFA estimates that increasing the Earned Income Tax Credit to EUR1,650 would cost EUR80m.

The SFA also recommended that the Government introduce a share-based remuneration scheme for employees of small firms. O'Neill said this would "improve staff retention and productivity in small and new firms, in particular at senior levels, by providing a long-term incentive and increasing employee buy-in."

The SFA said the scheme should be similar to the UK's Enterprise Management Incentive, and should waive the income tax, Universal Social Charge, and Pay-Related Social Insurance due. Employees should instead only be taxed on the capital gain from the sale of the shares. Owner-managers should have the option of targeting the scheme at key individuals, rather than being obliged to open it to all employees.

Another major area of concern for the SFA is capital gains tax (CGT). Budget 2017 introduced a lower CGT rate of 10 percent for entrepreneurs, with a lifetime limit of EUR1m. The SFA noted that the UK, one of Ireland's biggest competitors for mobile investment, has a lifetime limit of GBP10m (USD12.9bn) for its equivalent scheme.

The SFA argued that the Irish Government should increase its lifetime cap to EUR15m. It said this would help "Brexit-proof" the Budget.

Finally, the SFA would like the Government to increase capital expenditure to four percent of GDP per annum.

TAGS: individuals | capital gains tax (CGT) | tax | investment | business | Ireland | tax incentives | entrepreneurs | employees | United Kingdom | tax thresholds | tax credits | small and medium-sized enterprises (SME) | tax rates | social security | tax breaks | tax reform | trade association | trade | individual income tax | European Union (EU) | Europe

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