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Unions Call On EU To Scrutinise Irish Investment Scheme

by Jason Gorringe, Tax-News.com, London

28 December 2006


Ireland's Minister for Enterprise, Trade and Employment, Micheal Martin (pictured) has responded with "utter disbelief" to the decision of the Irish Congress of Trade Unions (ICTU) to lodge a formal complaint with the EU over the expansion of the Business Expansion Scheme because of concerns over tax evasion.

“The expansion of the scheme announced in Budget 2007 is aimed at helping small businesses to grow and create jobs in communities across the country. The BES scheme has helped small businesses to create over 800,000 jobs, and this expansion will support an enterprise culture," said Martin.

“The expansion is in line with the proposal of the small business forum which has been working and considering the issues facing firms over the past 12 months. The suggestion that the scheme would be used as a tax avoidance measure flies in the face of the reality that anyone who invests in business is taking a risk," he added.

In a statement last week, ICTU Economic Advisor, Paul Sweeney, described the measures BES measures as “expanded vehicles for tax avoidance for wealthy people."

"They are also state aid to the business sector at a time when the economy is booming," he argued.

ICTU is lodging the complaint with the European Commission on the basis that, as state aid, the schemes require EU approval.

Under provisions announced in Budget 2007 the amount an individual can invest under the schemes was increased from EUR31,000 to EUR150,000, while the amount a company can receive was raised from EUR1 million to EUR2million.

According to Sweeney, the schemes “may appear as if they are helping small businesses, but their main effect is to shield high income earners, who ‘invest’ in what are too often risk-free BES schemes, from income tax."

“The cost of these schemes to the taxpayer is likely to be far higher than the stated EUR178 million, because most tax expenditures are underestimated. The tax forgone by the exchequer will be made up by working people.”

He also contended that the decision to extend and expand the schemes runs contrary to government policy, which is to reduce rate of taxation and eliminate all tax breaks and loopholes.


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