Dáil Éireann Debate, Tuesday - 12 November 2013
57. Deputy Terence Flanagan asked the Minister for Finance if he will outline details of the 25 new measures that will be introduced to support entrepreneurs to create jobs and support small and medium enterprises as announced in budget 2014; and if he will make a statement on the matter. [47749/13]
View answerI would inform the Deputy that details of the 25 measures for jobs and growth that I announced in Budget 2014 are set out in Annex C of the Budget book. Full details of the budget are also available on my Department’s website (www.budget.gov.ie). I have set out a copy of Annex C for the Deputy’s convenience.
ANNEX C
€500m TAX PACKAGE BUILDING BUSINESS AND CREATING JOBS
25 MEASURES FOR JOBS AND GROWTH
Jobs and Growth remain the top priority. New businesses tend to be the greatest contributors to job creation. For new business success it is necessary to incentivise entrepreneurship, innovation and investment. Existing small businesses also require support to grow and create jobs. Access to credit and finance for SMEs is vital for economic growth and is central to Ireland’s continuing recovery.
Entrepreneurship is a powerful driver of economic growth and job creation. It creates new companies and jobs, opens up new markets, and nurtures new skills and capabilities.
Innovation accounts for about two thirds of the sources of economic growth and innovative firms tend to be the greatest contributors to job creation. Investment is essential for the survival and growth of Small and Medium Enterprises. Credit and Finance - ensuring enterprises and in particular SMEs have access to an appropriate flow of finance from a diverse range of sources - is a major policy issue. Opportunity - small and new business needs the opportunity to grow and flourish. To that end it is important to create a level playing field for legitimate business by tackling unfair competition from the shadow economy.
A package of 25 measures has been developed which focuses on the business drivers outlined above in order to realise the maximum benefit from the minimum cost.
The 25 measures with their intended targets are outlined below:
Promoting Entrepreneurship
1. Capital Gains Tax Relief for re-investment of previous asset disposals in productive assets
The measure applies where an individual makes an investment in assets for use in a new productive trading activity in the period 1 January 2014 to 31 December 2018 and subsequently disposes of this investment no earlier than three years after the date of investment. The CGT payable on the disposal of this new investment will be reduced by the lower of the CGT paid by the individual on a previous disposal in the period from 1 January 2010 and 50% of the CGT due on the disposal of the new investment.
Target: To encourage individuals to re-invest the proceeds of a previous asset disposal into new productive trading or a new company and therefore to encourage new business and to keep capital focussed on business and the creation and maintenance of employment.
2. Start Your Own Business (SYOB)
This measure is being introduced to encourage individuals who are long-term unemployed to start their own unincorporated business. A two year exemption from income tax up to a maximum of €40,000 per annum is being provided for individuals who have been unemployed for at least 15 months prior to starting their own business.
Target: To encourage individuals to move from unemployment to self-employment.
Stimulating Investment
3. Enhancement of Employment and Investment Incentive
The initial 30% relief available for investments under the Employment and Investment Incentive is being removed from the high earners restriction for a period of 3 years. This restriction limits the amount of tax reliefs that can be claimed by high income individuals. The EII provides that a maximum of €150,000 can be invested by an individual per annum. Therefore, by lifting the restriction on the initial 30% relief, these investors should be encouraged to invest more funds in the EII and improve the availability of funds to SMEs.
Target: To increase investment in Irish SMEs that are focused on job creation and expansion.
4. Enterprise Securities Market – Transfers exempt from Stamp Duty
This proposal involves removal of the Stamp Duty charge (currently 1%) on shares listed on the Enterprise Securities Market (ESM) of the Irish Stock Exchange (ISE). The ESM is the ISE’s market for growth companies. It has been specifically designed to meet the funding needs of companies at earlier stages in their development.
Target: It is intended to encourage more investors to back SMEs, thereby increasing the supply of equity available to them for growth and job creation. It may also encourage entrepreneurs and growing businesses to use the ESM to aid growth and job creation.
5. Inclusion of Real Estate Investment Trusts (REITs) in the Immigrant Investor Programme
Following the successful launch of the REIT product in Ireland it has been agreed with the Department of Justice to propose the inclusion of REITs as an investment option in the Immigrant Investor Programme.
Target: To encourage investment in REITs.
Financing Growth
6. Trade Finance
The Trade Finance Initiative would involve a tailored measure to support the growth of the export sector in Ireland thereby increasing investment, economic activity and employment. Discussions are taking place with the EIB to consider the feasibility of support being granted by the bank to underpin additional trade by Irish companies.
Target: To assist Irish exporters and businesses to increase exports and grow.
7. Credit Review Office – Increase Threshold
Increase in the threshold for applications that can be reviewed by the Credit Review Office from €500,000 to €3m. The increase in the number of reviewers sanctioned in Budget 2013 will ensure that the increased workload arising from this measure will be handled in a timely and comprehensive manner.
Target: To meet new lending demands from borrowers currently banked with non-trading banks and banks which are strategically exiting the Irish SME lending market.
8. SME Communications Strategy
Communication strategy to increase awareness of State supports amongst SMEs. This strategy will also ensure that there is a greater awareness amongst businesses of the soon to be re-launched credit guarantee scheme.
Target: To inform SMEs who are eligible for State supports but may not be aware of it or how to go about obtaining it.
9. Building Business Capacity
A programme, consisting of 2 days dedicated off site training together with expert mentoring support, to enhance SMEs business and financial capacity in relation to understanding and utilising a broader range of financial products, as well as equipping them with the necessary tools to make a strong business case when applying for credit. The programme will be launched on a pilot basis with 1,000 SMEs taking part next year.
Target: To assist micro and small business to grow.
Encouraging Innovation
10. Research and Development Tax Credit - Outsourcing
The limits on the amount of expenditure on R&D outsourced to third parties which can qualify for the R&D Tax Credit is being increased from 10% to 15%.
Target: This should help to assist small companies in performing R&D, as they are more likely to need to outsource because they may have insufficient resources in-house for certain functions. It should also support the outsourcing of discrete R&D tasks to smaller businesses.
11. Research and Development Tax Credit – Base Year
It is intended ultimately that the base year will be phased out entirely over time and as resources allow. In the interim, the amount of expenditure eligible for the R&D Tax Credit on a full volume basis (without reference to the 2003 base year) is being increased from €200,000 to €300,000.
Target: This measure will reduce the impact of the base year on companies who had significant R&D expenditure in 2003 and it will assist smaller companies to access the credit without reference to the base year. The phasing out of the base year, when complete, should improve the overall international competitiveness of the regime.
12. Research and Development Tax Credit – Key Employee
The key employee provision is in place in order to assist companies to attract key talent, by allowing the company to transfer the tax-free benefit of the R&D tax credit to employees who meet certain conditions. Some minor changes will be made to this element of the tax credit to remove some barriers to take-up that were identified in the review of the R&D Tax Credit which took place this year.
Target: This measure is to help R&D performing companies to attract key talent.
Cash Flow
13. VAT – Increase cash basis to €2m
The annual VAT cash receipts basis threshold for small to medium businesses is being increased from €1.25m to €2m with effect from 1 May 2014
Target: To assist small to medium businesses in the critical area of cash-flow and to reduce administration.
Protecting Compliant Business by Tackling the Shadow Economy
14. VAT Anti-Fraud Measures
(i) Disallowance of input VAT – Business which have not paid for supplies (in full or part) within a six month period will be required to repay the VAT claimed on those supplies. (ii) Quick reaction mechanism – Allows Revenue to apply an emergency and temporary reverse-charge measure to certain goods or services to address sudden and massive VAT fraud. (iii) Requirement to keep specific records – Provision is being made to allow Revenue issue a notice requiring businesses to procure specific information in circumstances where Revenue has reasonable grounds for believing that the records specified might assist in identifying VAT fraud.
Target: To protect compliant business from unfair competition by tackling the shadow economy. To assist small business in the area of cash flow by encouraging prompt payments.
15. Excise and Energy Tax Anti-Fraud Measures
Tobacco
This gives Revenue the power to search baggage and other receptacles for illicit tobacco products. Revenue can require a person suspected of illegal selling of tobacco products to stop, and to permit and facilitate a search of any baggage or other thing the person has with them, and which is reasonably believed to contain tobacco products concerned in the offence.
Alcohol
Alcohol products that are held on unlicensed premises may be made liable to forfeiture under excise law and to seizure by Revenue.
Mineral Oil Tax Law
(i) Supplier liability to mineral oil tax in the case of a supplier who knowingly supplies Marked Gas Oil to persons who have no legitimate use for it. (ii) Revocation and renewal of mineral oil traders’ licences in the case of suppliers who knowingly supply Marked Gas Oil to persons who have no legitimate use for it.
Target: To protect compliant business from unfair competition by tackling the shadow economy.
16. The Appeal System for Tax Matters
Reform the role, functions and structure of the Office of the Appeal Commissioners, who hear appeals against assessments, decisions and determinations of the Revenue Commissioners on a variety of taxes, and of the tax appeals system.
Target: To ensure an enhanced and cost effective appeal mechanism for tax cases, providing transparency and increased certainty for the taxpayers.
Tourism and Hospitality Sector
17. VAT – Retention of 9% VAT rate
The reduced rate of 9% VAT for tourism related services and goods has been a boost to the tourism sector but is due to expire at the end of this year. The 9% VAT rate is being retained.
Target: To support and encourage growth in small businesses in the tourism sector.
18. Reduction of Air Travel Tax to 0%
The rate of the Air Travel Tax will be reduced to 0% from 1 April 2014. The Air Travel Tax was introduced in March 2011 and since then a general rate of €3 has applied.
Target: To encourage the development of new routes leading to increased capacity and traffic flows. This increase in routes and therefore in passengers should lead to the creation of additional jobs.
Construction and Building Sector
19. Extension of the Living City Initiative
The Initiative is being extended to include residential properties constructed up to and including 1914 and certain areas of the cities of Cork, Galway, Kilkenny and Dublin.
Target: To have a beneficial effect on the construction sector by stimulating the regeneration of retail and commercial districts and encouraging families to move back into the centre of Irish cities to live in historic buildings.
20. Home Renovation Incentive
Tax relief of 13.5% will be available for qualifying expenditure on home renovation and improvement work. The relief will be granted by way of a tax credit split over two years following the year in which the works are carried out. The minimum expenditure must be €5,000 and relief will be provided up to a maximum of €30,000. The relief will be linked to the Principal Private Residence of an individual and the contractor must be tax compliant.
Target: To give a boost to tax compliant businesses in the construction sector.
21. Extension of CGT Relief for Property
Budget and Finance Act 2012 introduced a CGT incentive for property purchased in the period up to 7 December 2013. This purchase period is now being extended to 31 December 2014. Properties purchased in this extended period and which are held for a minimum of 7 years will not attract CGT on any gains if disposed of at that point. Proportionate relief will apply where disposals are made after 7 years.
Target: To encourage activity in the property sector.
Farming/Agriculture and Food Sector
22. VAT – Increase in Farmers flat rate addition from 4.8% to 5%
The farmers flat-rate addition is being increased from 4.8% to 5% with effect from 1 January 2014. The flat-rate scheme compensates unregistered farmers for VAT incurred on their farming inputs and is reviewed annually in accordance with the EU VAT Directive.
Target: To assist the farming sector. The increase to 5% in 2014 continues to achieve full compensation for farmers.
23. Capital Gains Tax Retirement Relief
CGT retirement relief is being further extended to disposals of leased farmland in circumstances where, among other conditions, the land is leased over the long-term (a minimum lease of 5 years) and the subsequent disposal of the farmland is to a person other than a child of the individual disposing of the land.
Target: The purpose of the measure is to encourage older farmers who have no children to transfer their farm to, lease out their farmland over the long term to younger farmers.
24. Review of Farmers Taxation
The Departments of Finance and the Department of Agriculture, Forestry and the Marine will conduct an independent review of farmer taxation in 2014 to ensure that tax reliefs are focused on those areas where they are needed most and also to ensure tax payer value for money
Target: To target farming tax reliefs at the areas where they will have the most benefit.
Film Industry
25. Improve the new Film Relief to include non-EU talent
The definition of ‘eligible individual’ is being extended to include non-EU talent, in conjunction with the introduction of a withholding tax.
Target: To attract major film productions and high-end television shows to these shores by improving Ireland’s attractiveness to international movie stars. These types of productions are job rich and can often give a knock-on boost to the tourism sector.
