13 October 2020 – The Irish Tax Institute welcomes the continued support that Budget 2021 gives to businesses and employees most impacted by the pandemic. In particular, the Institute welcomes the recognition by the Minister for Finance of the predicament of the self-employed who are unable to meet their current income tax liabilities.
Institute President, Sandra Clarke said the Minister’s inclusion of these liabilities in the debt warehousing scheme would be warmly welcomed by tax advisers and their clients who were facing significant surcharges if they did not meet the filing deadline by the end of this month. The warehousing scheme has also been extended to include repayments owed by employers who availed of the Temporary Wage Subsidy Scheme.
“We recently wrote to the Minister and Revenue highlighting the plight of small business owners who were falling through the cracks in the Government’s support mechanisms. People like the local hairdresser, the café owner or the publican who have suffered a serious drop in their income through no fault of their own and they simply don’t have the cash to pay their tax bill right now. The extension of debt warehousing to cover income tax liabilities greatly eases their immediate cash flow difficulties while allowing them to comply with their tax obligations,” said Ms Clarke.
The Institute said this cohort of business owners would also benefit from the innovative Covid Restrictions Support Scheme announced in the Budget. This scheme will provide targeted support to businesses forced to close or severely restrict their trade by ongoing public health restrictions. “There are many viable businesses that have been all but crushed by Covid-19 but that have a great chance of returning to profitability if they can outlast the virus. Advancing credit for trading expenses such as rent, by way of a cash payment from Revenue, will provide a lifeline for these businesses and their workers as they negotiate the uncertain months ahead,” said the President.
The Institute said the certainty provided in the Budget about the continuation of wage subsidy support was important to businesses plotting their way out of the crisis. The current Employment Wage Subsidy Scheme is due to end in March 2021. “The two wage subsidy schemes have been crucial in supporting businesses and protecting jobs since the onset of Covid-19. The assurance that there will be no cliff edge to this vital support is invaluable in the certainty it provides to businesses struggling to survive during a pandemic.”
The Institute also welcomed other supports in the Budget such as the reduction of the VAT rate to 9% for the tourism and hospitality sector, the equalisation of the earned income credit for the self-employed with the PAYE credit, and the flexibility afforded to those on the Pandemic Unemployment Payment to earn income.
While acknowledging the relaxation of the ownership rule for Entrepreneur Relief, the Institute regretted that nothing was done to reduce the headline rate of Capital Gains Tax which, at 33%, is very high by international standards.
Ms Clarke said the headline rate is what matters to potential investors, adding that past experience showed that a reduction could encourage increased transactions resulting in much needed revenue for the Exchequer.
“Given the low level of receipts in recent years – as low as 1.8% in 2019 – it is reasonable to ask if the high rate of CGT is having a dampening effect on productivity and growth in the SME sector. It’s a pity that a Budget that strongly supports business and protects jobs didn’t go the extra step of reviewing this important tax,” concluded Mr Clarke.
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