Wednesday 25 April 2018

Donohoe urged to cut VAT in 'pro-enterprise' Budget

Isme says finance minister Paschal Donohoe ‘must act prudently’ in the penultimate budget before Brexit. Photo: Collins
Isme says finance minister Paschal Donohoe ‘must act prudently’ in the penultimate budget before Brexit. Photo: Collins
John Mulligan

John Mulligan

The top VAT rate should be cut from 23pc to 21pc and reliefs for business startups and entrepreneurs updated, the Irish Small and Medium Enterprises Association (Isme) has told finance minister Paschal Donohoe in a pre-budget submission.

Isme has urged the Government to adopt a budget that is "pro-jobs and pro-enterprise in light of external challenges to the economy".

October's budget will be the penultimate before Brexit happens in 2019.

CEO Neil McDonnell said the Government must "act prudently and sensibly".

He said more should be invested in training and skills programmes.

Other demands made by Isme in its submission are that preferential VAT rates be introduced to encourage the uptake of green, low-carbon technologies for transport, lighting and heating. It has also told the government to spend more on infrastructure.

"The State needs to prioritise water provision, the national broadband plan, the completion of the M20 between Cork and Limerick, the rapid provision of affordable housing, and improved public transport," the group said.

It also wants the country's capital gains (CGT) tax and inheritance tax regimes to be updated in order to encourage the more intensive use of assets.

"We believe the current rates are a disincentive to churn assets for new investment," it said. "A reduction in the CGT rate for 2018 would not only increase the yield, it would stimulate investment elsewhere in the economy."

Isme has also told the Government that reliefs for startup businesses and entrepreneurs should be revamped in order to encourage the formation of new businesses and to encourage entrepreneurs to scale up ventures before selling them.

Entrepreneurs have criticised the government's last two budgets, claiming they failed to provide any real incentives or supports to entrepreneurs.

Ireland's capital gains tax rate currently stands at 33pc. For entrepreneurs, the rate was first reduced to 20pc on lifetime gains of up to €1m. In last year's budget, that rate for entrepreneurs was cut further, to 10pc, but the €1m ceiling remained unchanged.

The €1m ceiling remains significantly unfavourable compared to the treatment of entrepreneurs in the UK, where there's also a 10pc capital gains tax rate for entrepreneurs, but a lifetime ceiling of £10m (€11m).

Isme has also stressed the dangers posed for its members by Brexit.

"If the UK exits the customs union at the end of its Brexit process, the consequences for the Irish economy will be material and significant," Isme has warned Mr Donohoe.

"This will hurt all areas of our economy and society, including those not directly exposed to the UK market."

The group has also told the minister that the legislative basis for Ireland's rates system is "unfit for purpose".

"The current rates system requires substantial overhaul before it threatens business viability," it said.

Irish Independent

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