08/10/19

The Irish Tax Institute welcomed the support offered to Irish business in  Budget 2020 and agrees with the Minister for Finance’s decision to direct available resources to the sectors most vulnerable to the risk of a no deal Brexit.

In particular, the Institute welcomed the changes announced to a number of existing business tax measures to make them more effective and accessible to small businesses. “We have been calling for some of these changes for a few years now. So, it is gratifying that the Minister has listened to what the Institute and other stakeholders have been saying about measures such as the Key Employee Engagement Programme (KEEP), the Employment and Investment Incentive (EII) and the R&D Tax Credit,” said Frank Mitchell, the President of the Institute.

However, the Institute was surprised the Minister has decided not to increase the lifetime limit on CGT relief for entrepreneurs: “The Indecon Report commissioned by the Minister’s own Department recommended raising the Entrepreneur Relief limit from €1 million to €12million for those who re-invest in a new business. The UK’s equivalent measure allows relief up to £10million sterling.  With Brexit fast approaching, we need to be strongly placed to compete for international capital. The failure to raise the €1million limit leaves us exposed at a critical time for Irish business,” said Mr Mitchell.

To date, the main beneficiary of the R&D Tax Credit has been the multinational sector which accounts for three quarters of the relief. The changes announced today are aimed at small and micro companies. They also allow for greater collaboration with the Universities, a welcome change that is in line with international best practice.

The Minister said full details of the changes announced to key measures would be contained in the Finance Bill.  “While we are encouraged by the broad outline of the changes announced in the Minister’s Budget Speech, we will be watching out for the detail in the forthcoming Finance Bill.  It is important that we get these changes right because there have been some false dawns and time is of the essence for our SME sector.”

The Institute also welcomed the Minister’s announcement that the Special Asignee Relief Programme (SARP) and the Foreign Earnings Deduction (FED) are to be extended until the end of 2022.  The FED plays an important role in encouraging and incentivising Irish businesses to export to new markets. The SARP provides income tax relief to highly skilled internationally mobile executives to support business expansion and job creation in Ireland.

“These talented, highly sought-after executives command very significant salaries and are in a position to choose where they work. Without that relief, they would not be here and more importantly, the business expansion and the jobs they support would not exist. They make a significant contribution to the Irish exchequer through personal and other taxes, notwithstanding the SARP relief,” said Mr Mitchell, adding that similar reliefs exist in other European countries such as France, Spain and the Netherlands.

The Institute agreed with the Government’s decision not to cut personal taxes in Budget 2020, given the risk of a no deal Brexit. In this context, it welcomes the retention of the existing USC thresholds which will maintain the tax base. “A broadly-based tax system where the load is spread according to means will prove more resilient against the many risks that lie ahead for our small open economy,” said Mr Mitchell.

The Institute believes the measures announced in Budget 2020 will help to build productive capacity in our indigenous sector thereby decreasing our reliance on the multinational sector.  “Making our SMEs stronger and more profitable is the way forward for our economy, according to the IMF, the OECD and the European Commission.  Today’s announcements go some way to achieving that goal,” concluded Mr Mitchell.

For further analysis on Budget 2020 visit our dedicated Budget page.