Friday 30 September 2016

Ireland's top entrepreneurs call for overhaul of tax system

Government 'taking at every stage' as business leaders seek changes to uncompetitive tax and welfare regimes

Published 12/07/2015 | 02:30

Brendan McGrath: 'We talk about being the best little country to do business in. When you make broad statements like that you've got to make sure that you've ticked all the major boxes'
Brendan McGrath: 'We talk about being the best little country to do business in. When you make broad statements like that you've got to make sure that you've ticked all the major boxes'

A host of Ireland's top entrepreneurs have called for changes to Ireland's tax and welfare system to make it more attractive for business.

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The Government has faced sustained criticism over the 33pc rate of capital gains tax, the relative lack of a social welfare safety net for the self-employed and the tax treatment of share options.

Eirgen Pharma co-founder and chief executive Patsy Carney, who sold his company to Opko for $135m earlier this year, told the Sunday Independent that entrepreneurs "would like to be able to take what you've taken from one business and efficiently invest that money in the next venture to create more jobs, but no, you've to take a third of it and hand it over."

"Back in the day when it was closer to 20pc, it was palatable enough, but good God, at 33pc you're getting close to marginal."

Meanwhile, self-employed people are not entitled to jobseekers' benefit but may be entitled to jobseekers' allowance depending on their means. Carney said the social welfare situation "came as a shock" in the early days of his business. "We were kind of saying, 'Good luck to you if you're a self-employed director of your own company and things go belly up."

Slainte Healthcare founder and CEO Andrew Murphy, who is in talks with a number of potential investors about raising €20m by the end of the year, said that as things stand entrepreneurs take all the risk of the downside and give away 33pc if there is any upside.

"Until a business is actually sold, the entrepreneur has no idea whether they're going to get anything out of it, so it might look like it's going great, and it may be going great, but all it takes is one downturn or a major missed contract or a legal case against it, and they could lose everything.

"If it does happen to sell at a premium, then they're handing over 33pc of that despite the fact that the overall ecosystem has not borne any of the downside risk. We're seeing it become much more attractive for entrepreneurs to found businesses outside of Ireland due to the tax regime."

Gaelectric co-founder and chief executive Brendan McGrath, whose company is on the cusp of a €450m funding round, said that "if you ask where the system sits in terms of fairness, I don't think it sits right. We talk about being the best little country to do business in. When you make broad statements like that you've got to make sure that you've ticked all the major boxes, and certainly that is not a box that we're ticking very well. If you make a product, anything, and you look at the Government take all the way through the process, I mean, they're literally taking at every stage."

Frank Murphy, founder and CEO of circa €100m-valued Monex Financial Services, said a 33pc capital gains rate "doesn't seem right".

"We've got to be competitive with what is out there...the objective of giving a tax break is actually to bring in more money".

Sunday Indo Business

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