What to expect from Budget 2016
Published 11/10/2015 | 02:30
The Government's public consultation process on entrepreneurship got a big response from corporate Ireland. A suite of measures will be introduced in Budget 2016 to address business concerns, sources say.
One key change that has been heavily campaigned on is a cut to the rate of capital gains tax on the sale of business assets.
Ireland has the third-highest rate of capital gains tax - 33pc - in the OECD. Critics call it a "success tax". A proposal submitted by the Department of Jobs has asked for it to be cut to 10pc on all business gains, with a lifetime limit of €15m.
A reduction in the rate, experts argue, would incentivise entrepreneurs to set up businesses in Ireland and stop the flow of Irish entrepreneurs to the UK, where they are being lured by competitive tax rates.
More detail will be given on the R&D tax incentive known as the Knowledge Development Box (KDB). The KDB will grant a lower tax rate to income generated from R&D. It is expected to be set around 6pc.
Self-employed people are expected to get a break. Finance Minister Michael Noonan wants to extend the PAYE tax credit - worth €1,650 - to the self-employed and farmers in Budget 2016. This will probably be done incrementally over five years.
He may also reduce the difference between the USC paid by entrepreneurs and PAYE workers. Under the current regime, self-employed people pay 3pc more in USC on earnings over €100,000 than PAYE employees on the same money. It has long been a bone of contention for business owners, who argue that the extra USC penalises and suppresses entrepreneurship.
Hauliers will also get some form of relief. A reduction in motor tax has been discussed. The Irish Road Hauliers Association has asked the Government to reduce motor tax on large trucks from €4,200 to closer to the Northern Ireland rate of €900.
The Government is also expected to revise how much companies can raise through the Employment and Investment Incentive Scheme (EIIS). Introduced as a successor to the Business Expansion Scheme, the EIIS provides government-backed funding to Irish businesses. The fund is sourced from individual investors who enjoy tax relief on their investments. It is thought the limit on how much individuals can invest will also be lifted.
These business-specific changes will be delivered alongside much-hyped reductions in income tax, which should affect employees' take-home pay - boosting consumer demand and economic growth.
A cut to the rate of USC paid by everyone is coming, as is a cut to the top rate of tax, bringing it under the 50pc mark.
Sunday Indo Business