More family firms face closure after Budget, says tax expert
THE Budget created more problems for businesses than it solved and will probably lead to more family firms being shut down rather than passed on to the next generation, Pricewaterhouse Coopers (PwC) said.
Speaking at a Dublin Chamber of Commerce event yesterday morning, PwC tax expert Dermot Reilly disagreed with the general consensus that the Budget was a positive one for small businesses.
"The idea that this was a 'business-friendly' Budget only tells half the story, as many Irish family businesses are still struggling with high effective rates of personal tax, increasing employment costs and also the possibility of an increased tax bill or, worse still, debt forced on a business as a result of transferring to the next generation," he said.
"In framing recent tax legislation, there was a complete failure to assess the potential negative impact on private businesses."
He went on to highlight what he described as the "inherent contradictions" within the tax code, and predicted that many healthy enterprises will consider closing down rather than take on the financial risks now associated with transferring a business to the next generation.
The potential financial difficulties of transferring to the next generation, combined with significant changes likely to the European tax landscape, are gathering to generate a perfect storm for private businesses as they grapple to stay afloat, he added.
Finance Minister Michael Noonan seemed to put the small business sector at the centre of his Budget last week, when he unveiled, among other items, a 10-point plan to reform the tax code affecting SMEs. The changes, while small, would give a material boost to SMEs, he said.
Small business groups gave a cautious welcome to the measures, which included an increase in the R&D tax credit, and added relief for work expenses incurred overseas.