Slash tax to create jobs and attract business, report urges
Published 13/01/2014 | 02:30
INCOME tax should be dramatically slashed to encourage risk-taking in business and bring in foreign start-up companies, the Government is being advised.
A radical report by an expert group on entrepreneurship, seen by the Irish Independent, has recommended a flat tax on all income of 15pc to 20pc in a long-term strategy to attract corporations, immigrant business people and keep wealthy Irish in the country.
The low flat rate of tax would be on all income and would also be aimed at eliminating evasion.
"High income tax rates results in fewer jobs, results in more people on social welfare, and results in a dying economy," the report by the Entrepreneurship Forum says.
Chaired by entrepreneur and venture capitalist Sean O'Sullivan, the forum makes 69 recommendations about improving the number of jobs created by entrepreneurs in the country, including:
* Capping USC at €100,000 for self-employed just as it is for employees.
* Let women share maternity leave with partners.
* Tax breaks for company-to-company lending to bypass banks.
* Tight rules on banks using personal guarantees in lending.
* Remove any barriers to bringing in international banks to fill the gaps in Irish business lending.
* Attract foreign direct investment from start-ups, rather than just established multinationals.
* Make Ireland the European trade hub for China.
* Speed up grants for people coming off the dole to start up their own company.
The forum was set up by Jobs Minister Richard Bruton, who will bring the report to Cabinet in the coming weeks and is expected to act on many of the recommendations.
Although government sources admit the slashing of income tax isn't going to happen in the lifetime of this Coalition, the report is expected to fuel the debate about the need to bring down taxes to retain competitiveness.
A source close to Mr Bruton said the minister wanted to find out how to create a better environment for start-ups and entrepreneurs.
"We now have a list of proposed actions prepared by the very people who are out there every day starting, running, funding, mentoring and supporting those very businesses.
"One or two proposals -- like a flat rate of tax -- clearly won't be implemented by this Government but even those types of proposals will fuel debate and argument about the future of our economy. And if we have learned anything from the past it is that all considered and informed opinion deserves to get a hearing," the source said.
The forum says long-term changes will have to be made to ensure the primary burden of taxes do not fall too heavily on the shoulders of indigenous companies and the private taxpayer.
It says a flat rate tax would result in "less avoidance, more productivity and ultimately higher revenues and higher GNP".
"A flat tax on all types of income at 15-20pc would be a fantastic way of attracting corporations, immigrant entrepreneurs, and keeping wealthy Irish entrepreneurs here in the country. If a flat tax is not 'achievable', all capital gains should be taxed at 20pc rather than 33pc to incentivise investment in new enterprise," the report says.
Mr O'Sullivan says the forum believes Ireland has the opportunity to become "the most competitive country in Europe" if it adopts some key changes.
"Adjustments such as implementing a flat tax would have an immediate positive impact on nearly every productive worker in the nation, but would also require incredible political will and determination.
"Although it is unlikely Ireland will make such a move overnight, this report identifies a few longer-term issues which would eliminate overly complex tax structures and make life easier for all businesses in Ireland," he says.