[Ireland] Call for tax cuts and minimum wage restraint to help small firms

The Small Firms Association (SFA) has said that Capital Gains Tax (CGT) should be cut to 20 per cent in the upcoming budget to help stimulate investment and entrepreneurship, Irish Examiner reports.

When outlining their pre-Budget submission, the business representative group said significant benefits could be derived through exchequer increases as economic activity and investment transactions are stimulated.

Their key recommendations reportedly include changes to the tax system and supporting upskilling to address labour shortages.

The submission states that analysis by the Irish Tax Institute shows that CGT represents only 1 per cent of the government's tax revenue.

"In this context, there is very little to lose by reducing the rate, and the benefits could be significant. 

"International evidence as well as Irish data from the last two decades, has demonstrated that when CGT rates are reduced, revenue to the Exchequer increases, as economic activity and investment transactions are stimulated."

The SFA said small businesses are now looking beyond the COVID-19 pandemic and considering what their trading outlook will be in the weeks and months ahead. 

Sven Spollen-Behrens - SFA director - said the all-consuming nature of COVID-19 means Ireland’s economy can no longer accommodate the "long-standing barriers facing business-owners". 

Budget 2022 must take decisive action to end discrimination in the tax system against the self-employed and proprietary directors.

"To assist the recovery and make Ireland a better country for entrepreneurship capital gains tax should be reduced from the current penal rate of 33% to 20% and increase the lifetime limit for CGT Entrepreneur Relief to €15m," Mr Spollen-Behrens said.

In addition, the SFA wants changes to the tax appeals process which it claims is unfair and has tipped the balance to the detriment of the taxpayer.

"If a taxpayer disputes an assessment, they must pay the tax liability in full or face a potential interest liability at annualised rates of 8 per cent or 10 per cent per annum while their appeal is pending. Meanwhile, there is no obligation on Revenue to pay interest in the event of a successful appeal by the taxpayer," the submission says.

The SFA said the events of the past few months have highlighted the need for the Government to invest in policies to strengthen digital skills, re-training and boost basic skills.

“As the Irish economy comes out of the emergency phase of the pandemic, it is vital that the Government use Budget 2022 to focus on providing certainty on costs and support the retention of staff, to help small businesses survive and mitigate any long-term impacts from COVID-19 restrictions,"

However, the SFA cautioned that many businesses operate in low margin environments, making it difficult for them to absorb cost increases. 

Their submission calls on the Government to oppose any increase in the National Minimum Wage next year and postpone the introduction of the Living Wage.

Addressing barriers and disincentives for entrepreneurs and businesses is highlighted.

"Ireland is becoming a place where it is more and more difficult to do business due to continuing rising costs, be it wage costs, administrative costs, or utilities," Mr Spollen-Behrens said.

"The Competitiveness and Productivity Council has consistently signalled that Ireland continues to slip in its competitiveness ratings compared to other EU countries, Budget 2022 is a prime moment to reverse this downward trend."

“Small businesses can be major contributors to growth, job creation, and regional economic recovery if the right choices are made in Budget 2022," he said.

The Small Firms Association (SFA) has said that Capital Gains Tax (CGT) should be cut to 20 per cent in the upcoming budget to help stimulate investment and entrepreneurship, Irish Examiner reports.

When outlining their pre-Budget submission, the business representative group said significant benefits could be derived through exchequer increases as economic activity and investment transactions are stimulated.

Their key recommendations reportedly include changes to the tax system and supporting upskilling to address labour shortages.

The submission states that analysis by the Irish Tax Institute shows that CGT represents only 1 per cent of the government's tax revenue.

"In this context, there is very little to lose by reducing the rate, and the benefits could be significant. 

"International evidence as well as Irish data from the last two decades, has demonstrated that when CGT rates are reduced, revenue to the Exchequer increases, as economic activity and investment transactions are stimulated."

The SFA said small businesses are now looking beyond the COVID-19 pandemic and considering what their trading outlook will be in the weeks and months ahead. 

Sven Spollen-Behrens - SFA director - said the all-consuming nature of COVID-19 means Ireland’s economy can no longer accommodate the "long-standing barriers facing business-owners". 

Budget 2022 must take decisive action to end discrimination in the tax system against the self-employed and proprietary directors.

"To assist the recovery and make Ireland a better country for entrepreneurship capital gains tax should be reduced from the current penal rate of 33% to 20% and increase the lifetime limit for CGT Entrepreneur Relief to €15m," Mr Spollen-Behrens said.

In addition, the SFA wants changes to the tax appeals process which it claims is unfair and has tipped the balance to the detriment of the taxpayer.

"If a taxpayer disputes an assessment, they must pay the tax liability in full or face a potential interest liability at annualised rates of 8 per cent or 10 per cent per annum while their appeal is pending. Meanwhile, there is no obligation on Revenue to pay interest in the event of a successful appeal by the taxpayer," the submission says.

The SFA said the events of the past few months have highlighted the need for the Government to invest in policies to strengthen digital skills, re-training and boost basic skills.

“As the Irish economy comes out of the emergency phase of the pandemic, it is vital that the Government use Budget 2022 to focus on providing certainty on costs and support the retention of staff, to help small businesses survive and mitigate any long-term impacts from COVID-19 restrictions,"

However, the SFA cautioned that many businesses operate in low margin environments, making it difficult for them to absorb cost increases. 

Their submission calls on the Government to oppose any increase in the National Minimum Wage next year and postpone the introduction of the Living Wage.

Addressing barriers and disincentives for entrepreneurs and businesses is highlighted.

"Ireland is becoming a place where it is more and more difficult to do business due to continuing rising costs, be it wage costs, administrative costs, or utilities," Mr Spollen-Behrens said.

"The Competitiveness and Productivity Council has consistently signalled that Ireland continues to slip in its competitiveness ratings compared to other EU countries, Budget 2022 is a prime moment to reverse this downward trend."

“Small businesses can be major contributors to growth, job creation, and regional economic recovery if the right choices are made in Budget 2022," he said.