A cut in the capital gains tax rate for entrepreneurs selling shares in their companies will be the key business measure in the Budget. A special 20 per cent rate will apply, subject to restrictions, including a limit of €1 million, a significant reduction in the normal 33 per cent capital gains tax rate.
The cut in the capital gains tax rate will be presented as a major incentive for entreprenurs and investors backing them to move money out of savings and in to productive investment.
A package of measures to bolster Ireland’s reputation as a start-up destination will be unveiled in today’s Budget, Minister of State at the Departments of Finance Simon Harris confirmed yesterday.
The measures are expected to include the specific CGT incentives to encourage more investors to back early-stage firms with their savings, as well as and supports to reduce the costs of setting up new businesses.
“The focus will be on initiating a multiyear programme of such supports, starting with measures that can have the greatest short-run impact,” Mr Harris said. He did not detail any of the expected measures, but other sources indicated that the CGT move was the most significant change.
The Government is under pressure to strengthen its tax offering for start-ups following warnings from business groups that Ireland risks losing entrepreneurs to the UK, where the tax regime is more competitive.
The Department of Finance received 42 submissions in a recent public consultation on tax and entrepreneurship.
Group event
The Government has also been called on to reform the Employment Investment Incentive Scheme, which offers tax relief for people investing in business. But with the relief being relatively new and with major changes requiring approval from the EU Commission, only “ tweaks” to this are expected, according to sources.
Mr Harris was speaking at an event hosted by the Great Place to Work (GPTW) group and the Irish Proshare Association at the Dublin offices of A&L Goodbody.
He called Budget 2016 the first budget in a new business cycle for Ireland Inc.
“The finances in this country have been overhauled,” Mr Harris said. “Our debt has stabilised and is now on a downward trajectory.”
He noted the latest CSO figures, which show that Government debt fell to €204 billion, or 102 per cent of gross domestic product, in the first half of 2015.
Employee paper Also speaking at the event yesterday was Alex Edmans from the London Business School, who delivered the findings of a paper assessing the links between employee satisfaction, flexible labour markets and company share prices.
The research found that employee satisfaction was strongly associated with higher share values in relatively flexible labour markets, such as those in the US, the UK and Ireland, but not in countries with low flexibility, such as Germany.
GPTW chief executive John Ryan said the findings suggest that “if there is movement in the marketplace, the ability to attract talent to your organisation is going to be hugely impacted if it’s considered a good place to work”.
