Entrepreneurs in the Budget
Michael O’Leary, Partner 10th October 2018
What is that successive Irish governments don’t like about entrepreneurs and entrepreneurship? Yet again in Budget 2019 almost every other sector got a shake of the public purse, but for the wealth creators, those who create the enterprises and jobs that pay the taxes that afford that political largesse – nothing.
Here are just a few specifics. The big issues are the absence of any provisions to encourage entrepreneurship and to create business that create employment. We compete directly with the UK. When I write UK, remember that a Louth based business can relocate two miles across the border, into the UK, and benefit from all the good things the Westminster government offers to encourage employment.
- Capital Gains tax rate has been maintained at 33% here. In the UK the rate is just 20% for non-residential property. A thirteen-point difference is very, very significant, particularly when you are dealing in large numbers. So, guess where the smart money is heading? The basic economic primers teach that lower taxes generate higher compliance and give a higher tax take.
- One day our little State will no longer be able to rely on a handful of massive multinationals to pay the bulk of corporation tax. That day of reckoning could come at any time, as there is quite simply no telling as to what US President Trump might decide to do to (quite legitimately) cajole US companies to base themselves back in their homeland. Meanwhile our 250,000 SMEs are offered an Entrepreneur Relief of 10% on the first €1m. Again, two miles (or two minutes) across the border, you can benefit from a 10% relief on £10m or €11.5 million.So far, it’s two nil to the UK.
- In the Minister’s speech he said that last year’s KEEP provision, to help attract top employees to smaller companies had ‘limited success’. That is a euphemism for none. I’m told that not one, none, nada applied for the ‘benefit’ – proof, as if proof were needed, that these tax codes are created by people who do not understand that real needs of entrepreneurs. Need I say that the UK provisions are so, so much more attractive. Three nil.
- Add the R&D tax credits. Here it’s cumbersome and lacks certainty regarding what activities qualify. In the UK (by no means the land of milk and honey for business) they have the good sense of having a tailored scheme for smaller companies. Final score; four nil.
- The most disheartening thing is the lack of vision. Surely a Minister for Finance would like to be remembered for a change he or she made that made a big difference to corporate (and therefore tax paying) Ireland? Donagh O’Malley is still revered for having introduced free education in the 1960s. Has the lost (economic) decade knocked any ambition out of our top politicians?