Not all bad news as vital enterprise sector gets a boost
Amidst all the doom and gloom about our economic misery, there is a more positive story which deserves attention.
One of the outcomes from our years of economic success has been the creation of a class of entrepreneurs who are now establishing companies focused on developing new products and ideas for the global market place.
These companies typically invest in research and development and create high-end jobs.
However, some of these companies are highly mobile and are not bound by geography.
Therefore it is critical to our future economic recovery that due recognition be given to these companies.
By helping to develop these companies, Ireland will benefit in terms of additional employment, tax revenue and the enhancement of our global reputation as a centre for internationally traded business.
While I have no doubt there will be many positive and negative comments expressed about Budget 2012, we believe that some of the measures introduced are very welcome in helping to nurture and encourage these emerging entrepreneurial companies.
•A foreign earnings deduction for employees of companies which are expanding into emerging markets in the BRICS countries (Brazil, Russia, India, China and South Africa) is being introduced.
This will reduce the Irish income tax liability for these employees where they spend 60 days a year developing markets in these countries.
This is a particularly forward-looking measure and recognises the potential of these key developing export markets (and should help wean us off our dependence on the low growth EU and US markets). Hopefully, this list will be expanded over time.
•In addition to incentivising Irish companies, it is also important that we continue to incentivise multi-national companies to establish operations in Ireland. To this end, Finance Minister Michael Noonan has announced there will be new incentives to facilitate the transfer of key employees to Ireland.
In addition, there will be measures in the Finance Bill to further incentivise the international funds industry, the corporate treasury sector, the international insurance industry and the aircraft leasing industry.
•The R&D special tax credit will also be amended to make it more flexible and will permit more companies to avail of this relief.
•Mr Noonan also confirmed the corporate tax exemption for start-up companies is being extended for the next three years.
Very recently, the new form of the Business Expansion Scheme relief -- the Employment and Investment Incentive Scheme -- has received EU approval. This is one of the few remaining incentives available to encourage Irish investors to invest in Irish trading companies (which is all the more valuable given the scarcity of debt finance).
While there are many more measures that could be introduced in this area, we do have to recognise the economic reality. However, these measures demonstrate a commitment to support companies who are capable of making a meaningful contribution to our much hoped for economic recovery.
Mike Hayes is a partner in KPMG
Irish Independent Supplement