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Monday 5 December 2016

US now better for start-ups warns top Irish VC head

Atlantic Bridge boss criticises capital gains rate

Published 31/05/2015 | 02:30

CRITICISMS: ‘What we do is reward the very big corporates — but not the guys who have their roots here,’ says Elaine Coughlan
CRITICISMS: ‘What we do is reward the very big corporates — but not the guys who have their roots here,’ says Elaine Coughlan

Ireland is less attractive than the US for entrepreneurs for the first time in 20 years, according to one of the country's top venture capitalists.

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Elaine Coughlan, co-founder and general partner of Atlantic Bridge Capital, told the Sunday Independent that Ireland isn't "aggressive enough in how we create the right environment for fostering long-term entrepreneurship".

Ms Coughlan's company, Atlantic Bridge, has over $450m of assets under management. Companies in its portfolio include Movidius, Boxfish and Accuris Networks. Former Parthus boss Brian Long and text messaging pioneer Larry Quinn are both key players in the company, which has raised money from the likes of Denis O'Brien, Dermot Desmond and Bill McCabe in various funds.

Ms Coughlan slammed the 33pc capital gains tax rate.

"The up-case scenario is that an entrepreneur does very well and he sells the business, and in that scenario he hands over a third of his business to the State. Is that a fair allocation?"

She was speaking after the Irish Technology Leadership Group's global tech summit in Dublin last Tuesday, where she told the audience that Ireland "is no longer competitive for US guys … for the first time in my career, in 20 years, it's actually better for them to be in the States. It was never that way before. Uncle Sam knows how to tax."

She called the social welfare system for the self-employed - which provides no entitlement to jobseeker's benefit or access to jobseeker's allowance on a means-tested basis - "absolutely nuts", adding that there isn't a level playing field for major international companies and Irish entrepreneurs.

"The 12.5pc benefit is not a benefit to growth companies or indigenous guys, because they're starting off and they're loss-making for the first five or 10 years.

"So what we actually do is we reward very, very big massive successful corporates, instead of the guys that have their roots here... and will in all likelihood stick here for 20 or 30 years because they're Irish.

"It's not all about tax - but certainly it's wrong I think that somebody puts so much on the line, and creates so much for the State and also for the community, and that there's absolutely no safety nets for that.

"I think it's just absolutely nuts," she said.

John Flynn, managing director of ACT Venture Capital, which has invested in Storyful and Cubic Telecom, also said the 33pc capital gains tax is too high.

"If you look to the United Kingdom and the United States, there's tapered capital gains tax relief programmes that allow entrepreneurs achieve a capital gains tax of 10pc - if their companies are successful. Whereas here we have a blunt tool of 33pc.

"I think what we need to do to make ourselves more competitive, certainly against the UK and even on an international scale, is have some sort of refinement, so where an entrepreneur sells a business, maybe he can get a lower rate.

"We're also competing for the talent on a global stage, so you just need to have a competitive global tax code," he said.

"We have a very competitive global tax code for corporation tax, and we've got a lot of benefits built into the system around the R&D tax credits and the knowledge box - but what we don't have is a competitive tax code for entrepreneurs building their businesses.

"It probably means that founders that could establish a business either here or somewhere else are weighing up all the different features...we've got a lot of competitive features but this is a standout uncompetitive feature.

"It's forcing people to think twice whether they'll establish in Ireland."

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