Small-business owners to benefit from cut to capital gains tax rate
Published 08/10/2015 | 02:30
The Government will cut capital gains tax for small-business owners in next week's Budget, the Irish Independent can reveal. The move is part of a suite of measures aimed at making Ireland more attractive for entrepreneurs and it is hoped that this will result in more job creation.
The Jobs Minister Richard Bruton, in his pre-Budget submission, has urged Finance Minister Michael Noonan to slash the current 33pc rate to 10pc for business owners.
It is unclear at this stage if this cut will be applied but Department of Finance sources confirmed that the tax on the sale of land, property and shares will be reduced for business owners in the Budget.
"It is something officials in the department are still looking at as an element of the entrepreneur package and it is hoped there will be some reduction for businesses around capital gains tax," a senior Government source said.
It is hoped the reduced rate will release much-needed finance for the small business sector and result in entrepreneurs investing in new projects and creating more jobs.
The move is also aimed at stemming the flow of Irish entrepreneurs to the UK, where they are being lured by competitive tax rates and incentives.
Mr Bruton drafted a range of measures aimed at convincing entrepreneurs to set up businesses in Ireland in a briefing for Mr Noonan's tax and entrepreneurship review.
In the document - which has been seen by the Irish Independent - Mr Bruton's officials insist that the current capital gains (CGT) tax rate "impedes entrepreneurship" and "reduces incentives to invest and attract talent".
Ireland has the third-highest rate of CGT in the Organisation for Economic Co-operation and Development (OECD).
When the rate was increased by 3pc to 33pc in 2013, revenue yield from CGT fell by €48m.
Mr Bruton's proposals, which are backed by Enterprise Ireland and the Industrial Development Authority (IDA), calls for CGT to be cut to 10pc on all business gains with a lifetime limit of €15m. It also seeks to have the relief made available on all gains, rather than just the first asset sold by entrepreneurs.
There are existing tax incentives for entrepreneurs and start-up businesses, but they are deemed overly complicated and it is believed they not being availed of by those who stand to benefit.
Mr Bruton is pushing for simplified tax incentives for businesses, as he believes it will free up capital for future investment. There is also a belief in his department that the current rate of CGT is seen as a "success tax" which discourages people from setting up business in Ireland.
"Every year, Richard Bruton proposes a series of innovative tax changes that can drive enterprise and create more jobs and we work closely with Michael Noonan who has always taken a very constructive approach and included many of them in the Budget," a Department of Jobs source said.