I propose to take Questions Nos. 64 to 66, inclusive, and 68 together.
With regard to the Deputy's proposal to allow capital gains on Employment and Investment Incentive (EII) shares to be capital gains tax applicable rather than income tax applicable, the tax treatment of gains on the disposal of EII shares depends on how those shares are disposed of and may be subject to either Income Tax or Capital Gains Tax (CGT), depending on whether the shares are disposed of to a third party or through buyback of the shares by the relevant company.
Revenue have advised me that it is not possible to differentiate the gains realised from a disposal of EII shares separately to other gains on tax returns, nor is it possible to separately identify income or Income Tax specifically associated with the disposal of EII shares. Therefore, it is not possible to provide an estimate of the tax cost of applying CGT to all gains associated with EII shares.
Regarding allowing capital losses on EII shares to be allowed for capital gains tax purposes, I am advised by Revenue that information in respect of losses on EII shares are not separately available on tax returns and therefore an estimate of the tax cost cannot be provided.
Regarding the Deputy's proposal of introducing a scheme for microenterprises similar to the Seed Enterprise Investment Scheme (SEIS) in the UK, I am advised by Revenue that this measure cannot be costed as there is no basis from tax return data on which to estimate uptake of a scheme similar to the SEIS.
However, it should be noted that in 2019, I brought forward the Start-up Capital incentive (SCI) for start-up micro-enterprises (an enterprise which employs fewer than 10 persons and whose annual turnover and/or annual balance sheet total does not exceed €2 million) which is, in many respects, similar to the UK Seed Enterprise Investment Scheme. In addition, SCI specifically takes account of the reduced restrictions applied in the General Block Exemption Regulations to connected persons which otherwise apply in the case of larger SMEs.
With regard to the Deputy's proposal in relation to connected person restrictions, The General Block Exemption Regulations (‘GBER’) have direct effect across all member states. Ireland does not have any discretion in its implementation and, therefore, it is not possible to loosen the connected person restrictions.
By way of a general comment, the Deputy will be aware that my Department has undertaken a consultation process with stakeholders in relation to a number of tax incentives which may benefit SMEs, including EII. Specifically in relation to EII, the work builds on the changes made to the incentive in Finance Act 2018. The intention is that, on foot of the issues raised and analysis of the incentive by my Department, proposals will be brought forward for my consideration in the context of the Budget and Finance Bill process this year with the aim of ensuring that EII operates in an efficient and effective manner.