Last Friday, almost 1,000 guests attended our flagship event, the Annual Dinner, in the Clayton Hotel Burlington Road.

Guest of honour, the Minister for Finance and Public Expenditure and Reform Paschal Donohoe T.D., addressed the audience and outlined the Government’s efforts in preparing for Brexit, including the introduction of postponed accounting for VAT purposes.

Institute President Marie Bradley also addressed key issues in her speech, such as protecting our exports and our SMEs effectively from any future threats; the role that a fair and robust tax administration system can play; as well as the work and effort invested in our international tax policy journey.

On the night, the Minister confirmed that he intends to undertake a review of Entrepreneur Relief in the coming months. Ireland’s CGT regime and Entrepreneur Relief have been key areas of focus for the Institute for a number of years.

Read extracts from the President’s speech below:

Brexit challenge highlights need to deepen the capacity of indigenous sector

Irish Tax Institute President, Marie Bradley address to Irish Tax Institute Annual Dinner

22 February 2019

Clayton Hotel, Burlington Road

Addressing the Irish Tax Institute Annual Dinner, President Marie Bradley has stressed that Brexit poses political and economic challenges and its consequences are unknown. In her opening remarks Ms Bradley said: “On recognising the economic and domestic trade challenges that lie ahead for us as a country, I want to address the importance of supporting and deepening the capacity of our indigenous sector, and of protecting our exports and our SMEs effectively from any future threats. Small and indigenous business can flourish. The opportunity is to match the successful focus we bring to bear on foreign direct investment, with the same long-term policy and political commitment on the indigenous sector”, she said.

Tax policy and administration can be a game changer

Ms. Bradley said “Irish business needs access to finance and expertise to make the right strategic decisions. Tax policy, and its administration, can be a game changer in creating the right culture and the right environment. Considering Brexit and looking as tax practitioners at the facts in SMEs, the financing constraints for SMEs are the most relevant. Lack of finance deters innovation, limits expansion and stymies exports.”

Access to reliefs and clarity on them is key

“Given the limited access to finance for Irish business, which requires much needed capital to innovate, hire and develop new markets existing tax measures become critical. The income tax incentive for individuals who invest in Irish business – the Employment Investment Incentive (EII); and the income tax refund scheme available to individuals who start their own business – the Start-up Relief for Entrepreneurs (SURE) are now vital tools”, said the Institute President.

“Businesses and tax practitioners are facing challenges in accessing these reliefs and providing clarity to investors that such reliefs are available. Whilst we welcome the move to self certification for investments made from the beginning of this year, additional focus is required now in resourcing the division within Revenue, although we appreciate that much of Revenue’s immediate attention and resources are being dedicated to the urgency that is Brexit”, she added.

“On the EII front we need to make sure that the investments caught in the old system are processed in a timely and efficient manner. In most cases these investments are time-sensitive and therefore, approval needs to be given to businesses and investors without further delay, otherwise we risk lost investment and the growth and employment that would flow from it.”

Ms. Bradley said “The second factor impacting activity is our general CGT rate of 33% which is the third highest in the OECD, 13 percentage points above the median. At 33% it collected €994m for the State in 2018 and equates to 1.82% of the overall tax yield. Given the barriers created by such a high rate, we strongly believe that we should reflect on the behavioural change that could well arise due to a reduction in the CGT rate. When the rate was as high as 40% in 1997, CGT receipts represented 0.74% of the overall tax yield. The level of CGT receipts immediately increased after the rate was dropped to 20% in 1998. When the policy decision was adopted to lower CGT in 1998, the CGT yield that resulted in subsequent years was much higher than it had previously been (albeit in an improving economic environment).”

Barriers to angel investors brings about a lose-lose situation that is to the disadvantage of Irish SMEs

“We are also uncompetitive when it comes to Entrepreneurs’ relief, a challenge that is amplified given our high 33% CGT rate. Entrepreneurs Relief is available in the UK at 10% on the first £10 million, compared with €1 million in Ireland. Angel investors, who are, so often, the vital source of expertise and experience in young Irish companies, are locked out because they do not work full time in the business. A barrier that brings about a lose-lose situation that is to the disadvantage of Irish SMEs”, she added.

It is important that we give honest and fair credit to the economic upside that arises from tax expenditures

Ms. Bradley said she appreciated that the analysis of our tax expenditures is ongoing, and that the issue was before the Oireachtas Committee on Budgetary Oversight earlier this month. “However, in analysing our tax expenditures it is important that we give honest and fair credit to the economic upside that arises from such expenditures, such as job creation, improved innovation and productivity gains”, she said.

“For example, the European Commission in its own report on angel investment found that tax incentives are part of broader set of policy tools for supporting young, growing and innovative businesses and have a role to play when properly designed. It stresses that “taxation plays a role in supporting or blocking” investment. We cannot afford to ignore such findings if we are to give wings to the best and most ambitious young Irish companies of the future”, added Ms. Bradley.

END