Tuesday 25 October 2016

Noonan signals he will change tax treatment of Irish entrepreneurs

Published 02/08/2015 | 02:30

Noonan signalled earlier this week that he would make changes - but the minister did not specify what the changes would be
Noonan signalled earlier this week that he would make changes - but the minister did not specify what the changes would be

Finance Minister Michael Noonan is set to bend to pressure to improve the tax treatment of entrepreneurs in the upcoming Budget.

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Discussions about cutting Ireland's 33pc rate of capital gains tax have already taken place between officials from Noonan's department and officials from Richard Bruton's Department of Jobs.

The officials have also discussed the tax treatment of self-employed people in the tax system. A USC surcharge of 3pc applies to self-employed people earning over €100,000.

Noonan signalled earlier this week that he would make changes - but the minister did not specify what the changes would be.

The Department of Jobs has written to Noonan's department seeking a raft of changes including a cut in capital gains tax and a new share option scheme for SMEs.

"Richard (Bruton) has written to me as he always does before Budgets. We always take his views into account so my officials will engage with his officials. Normally we don't give him everything he looks for, but we give him some of what he looks for," Noonan said.

"So it's part of the budget process, but we won't be making announcements before the Budget.

"If you go back to one of the leading lights in economics about 200 years ago, Adam Smith, he said that the sources of wealth were land, labour and capital. Any modern economist would say entrepreneurship and innovation are now clear sources of wealth.

"I'd be very conscious that we must develop innovation in the country if we're going to have a modern economy which does better than the comparable economies in Northern Europe.

"The whole innovative space is one of the planks on which we're going to build the modern economy and I think innovation and entrepreneurship in the industrial sense are nearly synonyms. So I'll take Richard's proposals very, very seriously for the Budget."

A spokesman for Bruton said that at a recent meeting of the Entrepreneurship Implementation Group - which includes senior officials from the Department of Finance, is chaired by Bruton and designed to implement the Government's entrepreneurship plan - taxation and entrepreneurship was discussed "in some detail".

"Specific issues that were discussed include the potential for a lower CGT rate targeted at entrepreneurial activity as well as the treatment of the self-employed in the income tax system," the spokesman said.

A Department of Finance spokeswoman said the matters are being considered as part of the Budget and decisions will be made by Noonan.

The news comes in the week when the National Competitiveness Council (NCC) warned that Ireland needs to increase the rate of entrepreneurship and investment in new sectors.

"The narrow base of exporting firms and exporting sectors continues to pose a risk for the economy," the NCC said.

NCC chairman Peter Clinch told the Sunday Independent that "it's absolutely crucial for Ireland that we enhance our innovation intensity".

"One of our key findings in the report that we're fairly low down for example on R&D spend, relative to the types of countries that we're trying to compete with.

"Clearly our ability to pay wages, our ability to pay for our health services, our ability to pay for good social protection and our ability to pay for old age pensions... depends on our competitiveness.

"For that reason a key part of that is going to be to support entrepreneurs. The Competitiveness Council hasn't taken a specific position on the tax treatment of entrepreneurs. My personal view is that it's something that should be considered very seriously because there are a number of ways in which the self-employed are not treated equally to those who are in PAYE employment.

"Capital gains tax has gone up substantially in recent years. This is my personal view but if you remember back to when it was reduced originally, that resulted in a larger tax take [because of a rise in activity] so while the tax rate reduced the tax take increased."

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