Maeve Dineen: Speech long on aspiration but short on inspiration
BRIAN Lenihan sounded short of ideas yesterday and was infuriatingly vague about the few new policies unveiled during what was certainly his dullest and most unconvincing Budget speech ever.
Thanks to the four-year plan, we already knew the bones of the Budget, but Mr Lenihan did flesh out the details on the BES scheme's replacement, to be known as the Business Investment Targeting Employment Scheme, or BITES, which will allow investors to put as much as €10m into a company and invest €2.5m in any one year.
Some businesses will undoubtedly welcome the extension of the start-up corporate tax exemption, and the accelerated capital allowances scheme for energy efficient equipment, but these measures, while worthwhile, will affect few companies.
The planned reduction in the rate of withholding tax from 35pc to 20pc on payments to tax registered subcontractors in the construction sector will finally bring the tax into line with the standard rate, but it will probably be a case of too little, too late for many subcontractors who will only benefit from this move late next year.
While most businesses will not welcome the changes to PRSI, it makes sense.
The tax code is much too complex and the Government should not waste this crisis by failing to make the code much simpler. If you accept that the tax wedge has to be increased, and that the burden must be shared, then PRSI is a logical place to begin.
Other changes such as the abolition of the reliefs on patent royalty exemption also make sense; if ever there was an exemption that was abused, this was it.
Changes that really don't make sense are the abolition of tax reliefs on approved share option schemes and shares purchased by employees.
These are petty measures that won't save much but will send a chill over corporate Ireland. We need to spread ownership of our companies and encourage those who manage companies to have a stake in those companies.
At a time when high personal taxation and the gloomy climate will drive many wealth creators overseas, share schemes are one easy way that cash-poor companies can retain key staff and promise them their hard work will eventually pay off. In the same vein, Mr Lenihan is almost certainly wrong to increase capital gains tax and capital acquisitions tax, which will probably lead to the unfortunate situation where elderly company owners cannot afford to transfer companies to their children.
It is always a mistake to introduce legislation that divorces the people who run companies from their firms.
While it is good to see that our 12.5pc corporation tax is here to stay, for the moment anyway, it is also interesting to contrast the corporate tax measures with those announced in the recent UK consultation document on corporation tax.
Ireland is fiercely protective of the 12.5pc corporation tax rate, and rightly so. However, the UK is proposing some interesting measures in the taxation of income from intellectual property, and foreign profits, which could make Britain a more significant competitor for mobile inward investment.
On the 10th anniversary of the introduction of the tax rate, perhaps it is time to stop sitting on our crumpled laurels, and instead use some imagination to introduce the next ingenious tax break to lure the most innovative companies to our shores.
In truth, there were more ideas for business in last week's four-year plan than in the Budget, and a lot more detail as well.
The four-year plan makes reference to pro-business ideas such as smart grids, broadband, reductions in office rents, attempts to cut legal costs, public sector efficiency, enterprise supports; as well as anti-business measures such as VAT increases, the abolition of patent royalties and carbon taxes. Of course, whether any of that will be delivered is anybody's guess.
It was hard not to agree with Fine Gael's Michael Noonan when he complained that there was "not a single proposal to support job creation or get the economy going again", but equally there is little in the Budget that will have businesses squealing either.