The Smalls Firms’ Association (SFA) said the Government must deliver on its commitment to end tax discrimination against the self-employed.
In a pre-budget submission the group called on the Government to increase the self-employed earned income tax credit to €1,650 per year, putting it on a par with the PAYE tax credit.
In the previous budget the Government increased the tax credit for the State’s 147,000 self-employed people by €400 to €950, a move welcomed by the SFA.
However, chairwoman Sue O’Neill said the ongoing gap between the two tax credits meant that entrepreneurs and owner-managers still pay significantly more tax than employees on the same gross income.
"The Government made a commitment in the Programme for a Partnership Government to level the playing field by Budget 2018. It must now deliver on this commitment," she said.
In its submission it called on the Government to focus on a small number of priorities that would create the biggest impact with the resources available.
Tax credits
Apart from equalising the tax credits, it wants the establishment of what it called a workable share-based remuneration scheme for employees of small firms.
“An employee share option scheme tailored to small firms would improve staff retention and productivity in small and new firms, in particular at senior levels, by providing a long-term incentive and increasing employee buy-in,” Ms O’Neill said.
“In the US paying employees partly through a stake in the business has allowed many start-up businesses to grow rapidly with relatively low costs, while employees can reap huge rewards.
“The scheme should be simple and easy to understand. It should waive the income tax, USC and PRSI due; instead employees should only be taxed on the capital gain from the sale of the shares,” she added.
The SFA also called on the Government to ensure that Budget 2018 was adequately “Brexit-proofed”.
Attractive destination
To this end it wants the lifetime limit for for entrepreneur’s Capital Gains Tax (CGT) relief increased to €15 million, which would eclipse the UK’s relief.
"Ireland must become a more attractive destination for starting a business or investing in a small firm by increasing the lifetime limit for CGT entrepreneurial relief to €15 million," Ms O'Neill said.
Finally, the group also called for a hike in capital spending to 4 per cent of gross domestic product (GDP).
“Ireland has experienced a decade of under-investment in infrastructure. The vast majority of capital expenditure is currently spent on maintenance and repair as opposed to growing the country’s social and economic capacity,” said Ms O’Neill.
