The Government should reduce the rate of capital gains tax (CGT) and expand corporation tax relief for start-up companies in next month's budget to boost growth in the financial technology sector, Financial Services Ireland (FSI), a unit within employers' group Ibec, has urged.
In a 10-page budget submission, FSI also calls for a broader interpretation of the knowledge development box (KDB) to include items such as “software, know-how and essential confidential industry knowledge”.
“The original guidance around the KDB had indicated that only patents with a legal protection could qualify,” the submission states. “A broadening of the qualifying asset mix . . . would be very welcome. A lowering of the effective income tax rate for intellectual property is occurring in other EU countries, and if Ireland wants to keep pace with its competitors in developing this core component of FinTech, it should follow suit.”
On corporation tax relief, FSI said the link between PRSI paid by start-ups and access to the tax exemption was limited due to low employee numbers.
“Allowing start-ups to access the relief more efficiently by redesigning this link will enhance job creation and future PRSI revenues and corporation tax receipts,” FSI said.
The body also calls for the 33 per cent CGT rate to be cut, noting the rate in Germany and UK is 28 per cent, and 15 per cent or lower in Latvia, the Netherlands and Lithuania.
It argues reducing the rate would boost investment and, in turn, increase tax revenues from this source. FSI, which has 125 financial groups as members, suggests “strategic exemptions” should be strongly considered.
FSI has called on the Government to incentivise loan capital investments in high- tech start-up companies. “Consideration should be given to the rate of income tax on loans made to qualifying start-up companies in comparison with the rate of corporation tax paid by such companies on their profits,” FSI states.
“Consideration should also be given to exempting interest on such loans from the universal social charge. Finally where such a loan is converted into equity consideration should be given to exempting any capital gain arising from such equity from the full impact of capital gains tax.”
In addition, FSI wants the Government to incentivise capital investment in new IT platforms by established providers of financial services.
Other suggestions include extending parental leave to men, aligning income tax benefits for entrepreneurs with those of PAYE workers, and changes to the income tax benefits under the start-up relief for entrepreneurs scheme.
