Dáil Éireann debate -
Thursday, 6 Mar 1997

Vol. 476 No. 1

Written Answers. - Incentives to Entrepreneurs.

Ivor Callely

Question:

104 Mr. Callely asked the Minister for Enterprise and Employment the consideration, if any, he has given to new initiatives in relation to rewarding risk for business entrepreneurs in order to help the development of our economy; and if he will make a statement on the matter. [6422/97]

Minister for Enterprise and Employment (Mr. R. Bruton)

As part of overall enterprise support and development strategy, my Department, in conjunction with the industrial development agencies and the Department of Finance, is fully aware of the importance of measures that reward risk for business entrepreneurs. To promote an enterprise culture it is essential to provide mechanisms that encourage and help people to go into business for themselves and, secondly, to encourage them to stay and develop their business through risk reward mechanisms. If that twin strategy is successful the rewards are a greater level of entrepreneurship and innovation in the economy leading to increased job creation. Several mechanisms are in place to encourage individuals to develop their existing business or take that first vital step towards entrepreneurship.

The Business Expansion Scheme exists to channel much needed equity into growing business, including start-ups, that would not otherwise have had access to equity capital. In 1996 the Government decided to extend the BES to April 1999. Subject to meeting specific qualification criteria the BES Seed Capital Scheme provides a refund of income tax already paid to individuals who are either currently in employment or are unemployed and who are interested in starting up a qualifying business.

County Enterprise Boards form a nationwide network to encourage the development of local enterprise culture through the provision of financial assistance, advice and information. Their principal areas of activity are services, tourism and industry. To the end of 1996 CEBs assisted in the creation of over 3,000 full time and over 500 part time jobs.

Through the Operational Programme for Industrial Development funding of approximately £66 million for early stage equity is available through approved Seed/Venture Funds. Some 25 per cent of this funding is intended for seed capital investment.

The industrial development agencies, as part of their development mandate, are increasingly devoting more of their financial resources to equity investments in developing indigenous companies.

Within the private sector a number of new participants have become active in the past few years in the venture capital area. These bodies are charcterised by their concentration on start-up and early stage financing. In addition, within the banking sector the main banks have moved towards the elimination of seeking the security of the family home against bank loans and have introduced special customised short and medium sized lending products for business customers, in a number of instances specifically for young and emerging businesses.

All of the above are aimed towards the reduction of the initial entrepreneurs risk by sharing that risk.

Within existing businesses the tax code has been amended significantly in recent years so that investors and entrepreneurs are rewarded for their risk by allowing them to retain more of the profits and gains earned from the business. In 1995 this Government reduced the standard rate of Corporation tax from 40 per cent to 38 per cent. There will now be a further reduction to 36 per cent from 1 April 1997. The special 30 per cent rate of Corporation tax applicable to the first £50,000 of taxable company income was first introduced by this Government in 1996. It has now been decided to reduce this rate to 28 per cent effective from April 1997. The special low rate of Capital Gains Tax is being reduced from 27 per cent to 26 per cent with effect from 6 April 1997. This rate applies to gains realised by individuals on the disposal of ordinary shares in certain smaller private companies, i.e., having a market value of less than £25 million.

These measures demonstrate a continuing commitment on the part of the Government to developing an enterprise culture which rewards risk, enhances employment opportunities and assists in the further development of the economy. In conjunction with other Departments and agencies, my Department will continue to assess the need for any further measures that may be needed to further enhance the climate for enterprise.