Monday 20 November 2017

High taxes 'forcing startups to move to the UK'

Gina Quinn
Gina Quinn
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Colm Kelpie

Colm Kelpie

Ireland is at risk of losing growing numbers of startup businesses to the UK where the tax regime for entrepreneurs is much more competitive, business leaders have warned.

Dublin Chamber of Commerce said it has noted an increase in the number of businesses seeking to relocate away from Ireland to Britain, and warned the UK has achieved a number of competitive advantages within the last five years that pose a threat.

The Chamber said the tax regime for entrepreneurs in the UK is better than Ireland in nine out of ten categories.

"This was not a topic three or four years ago. We were hearing nothing about this then," Chamber chief executive Gina Quin, pictured, said.

"But in the last three years there has been a definite increase in the noise about this.

"There's a lot more talk about 'where am I going to get the best chance of making my company a success'. And the answer to this is not always Ireland or Dublin.

"These are Irish born and bred entrepreneurs. Some of them are choosing to set up a second office in the UK and some of them are completely decamping and moving their business there."

The Chamber flagged its concerns in its pre-Budget submission to Government in recent days. In the submission, the Chamber said it is not only multinational corporate investment that is mobile, but startups and entrepreneurs more generally.

Of ten key tax categories, Ireland is only cheaper for corporation tax, where its rate is 12.5pc versus the current 20pc UK figure, which is due to fall to 18pc by 2019.

"Dublin Chamber has noted an increase in the number of businesses seeking to relocate to the UK. While this trend does not automatically imply job losses for Ireland, it does carry a heavy opportunity cost as businesses that might otherwise have started or grown in Ireland are now doing so in the UK," the submission stated.

"The nature of the service industry and technology means that sectors that were once domestic and non-exporting are now able to establish anywhere internationally, making the relative taxation regime even more important for attracting investment."

The concerns are shared by Dublin's first Commissioner for Startups, Niamh Bushnell, who said the environment in Ireland doesn't encourage people to get involved in investing or startups.

Ms Bushnell said Ireland must allow for a culture of angel investment to develop, similar to what is taking place in the UK. "If you go to any very active startup hubs globally, one of the key components will be strong angel investor activity," she said.

"We don't have that in Ireland because we don't have the environment and the infrastructure from a tax perspective to encourage the ordinary man and women to engage." Ms Bushnell said it is much easier in the UK to get that early stage funding because the required mechanisms are in place.

The Dublin Startup Leaders Group, a group founded by Ms Bushnell, is urging the Government to introduce an equivalent to the UK's Seed Enterprise Investment Scheme (SEIS).

This encourages investors to finance startups by providing tax breaks for people prepared to back projects.

SEIS income tax relief currently equates to 45pc of the initial investment. And if, after the three-year investment period, the investor decides to sell his or her shares any gains made will be exempt from tax.

"All of the accelerators in Dublin... have instances of companies that have gone to the UK for early stage funding," Ms Bushnell said. "So we are seeing the start of what is potentially a big issue. It is something that we are hoping to nip in the bud."

Gary Leyden of NDRC, an early stage investor in Irish tech companies, suggested Ireland should look to the UK and emulate its approach.

"The bigger picture is around the messaging that this sends out internationally," he said.

"We're trying to position Ireland as a startup hub, but London has gone after that mantle aggressively in the last two years.

"How they've co-ordinated everything around that, from a starting point of no where, they've really progressed rapidly. And now they're challenging what was rightly our title."

Mr Leyden said there is a challenge here to unlock the capital in banks.

"We're certainly seeing a trickle of companies who are saying, 'OK, it's challenging to raise that money so why don't I go over the border to Newry or relocate to London.

"All of the companies we invest in are highly mobile so that's not necessarily a hugely challenging decision to make at that early stage, but what we want to do is to make sure that we get those companies a little bit further down the road, when it's more challenging for them strategically to relocate."

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