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Employment and Investment Incentive Scheme

Dáil Éireann Debate, Wednesday - 11 July 2018

Wednesday, 11 July 2018

Ceisteanna (68)

Peter Burke


68. Deputy Peter Burke asked the Minister for Finance if he will address the delay in the approval of the employment and investment incentive scheme in view of the fact that it is hampering investment in the business sector; and if he will make a statement on the matter. [30766/18]

Amharc ar fhreagra

Freagraí ó Béal (7 píosaí cainte) (Ceist ar Finance)

This is to ask the Minister for Finance to address the delay in the approval of the employment and investment incentive, EII, funding. This is critical for the small business sector. I know that state aid rules have been an issue and the Minister has conducted a review in the Department. I am interested to hear his views on it.

The employment and investment incentive, provided for in Part 16 of the Taxes Consolidation Act 1997, is an incentive whereby individuals who invest in certain companies obtain income tax relief on the amount invested. A number of conditions must be complied with. First, relief can only he granted to investors after ordinary shares have issued. Second, companies in which the investment can be made are those which carry on certain trading activities, are unquoted or have a balance sheet total of up to €43 million. Relief is only available where all of a company’s share capital is fully paid up from the date the shares were issued. There are additional rules which depend upon the age of the company. Companies which are less than seven years old and are raising EII for the first time have fewer requirements to meet than older companies or companies raising EII for a second or subsequent time.

Revenue has informed me that the increased complexity of the scheme, arising from changes in the Finance Acts of 2015 and 2017 to comply with state aid requirements means that each application takes longer to process than in previous years. The increased complexity also results in a large number of incomplete applications being made, which in turn increases the volume of correspondence dealt with by the processing team. In addition, there was an increase in the number of companies applying for relief.

During the passing of the Finance Act 2017, I announced a review of EII and the start-up relief for entrepreneurs scheme, to be completed in advance of this year's finance Bill. Among the matters to be addressed in the review is whether the incentives, as currently designed, provide a platform for the effective operation of the reliefs. The review is under way and the public consultation is now complete. I expect that proposals to address any shortcomings in the operation of the scheme will form part of the final analysis.

I welcome the response from the Minister. The delay in this funding getting approval is significant because when a small business is trying to raise finance, it needs certainty for those who might put money into the scheme. I am aware of one example in south Longford, which has the capacity to employ 30 people, Everyone's tax return is due at the end of October. People have to plan in terms of the cashflow required to discharge the tax liabilities. If they are considering investing in such schemes, they also need certainty to ensure the scheme is approved by Revenue. This is one of the points on which there are significant delays and many tax practitioners have raised the issue that there is a huge delay in getting approval for schemes. Small business is the lifeblood of our local economies. If investors cannot get approval for a significant scheme like this, it will be hampered. When we announce these schemes in the budget it is very important that they can be implemented and that investors can get relief in a timely manner.

I accept the Deputy's points. My objective is to have all of that work complete well in advance of the budget and to look at any points that need to be considered. As I am sure the Deputy is aware, we have made a number of changes at an operational level to deal with issues that have been raised on the operation of the scheme. We have brought in a new form because the original form was too brief. It led to follow-up queries that in turn delayed the overall process. We have now brought in a screening process at the start of the process to better deal with any issues upfront and to allow in turn for a quicker resolution of the entire process. We have brought in a new system to track the age of each case within the system to be better aware of any delays that could be developing and we have now brought in specific phone lines to deal with issues in this service. They have been open now since 14 March. It is my objective that we would have work done in advance of the finance Bill later on this year.

I welcome the response from the Minister and the updating of the new format. It is important that it is simple to apply for it. Obviously rules must be strict in terms of the qualifying criteria but when a firm can avail of this relief and when a taxpayer can put money in and avail of the scheme, it is a vital tool for business because the taxpayer gets relief and there is a chance to grow jobs, growth and investment in a local area. I have seen this being used to brilliant effect working as a tax practitioner for over a decade. I have seen how advantageous it has been for people to invest in the old business expansion scheme, BES. There is risk in all of these things but it is important that when there is a chance to grow the economy in ways that are cost effective for the taxpayer, that those opportunities are grasped.

I concur with what Deputy Burke has said. It is an issue I have raised in parliamentary questions and directly with the Revenue Chairman and the consistent feedback from the business community is that there are operational problems and the turnaround times with Revenue have lengthened. The changes made in the Finance Act last year seemed to have an impact, in that it became more complicated and confusing. As I look at the statistics as of the end of March, there were 180 open applications. In some cases the delay is obviously on the side of the applicant rather than the Revenue but the consistent feedback has been about operational problems and turnaround times with Revenue. I hope that aspect of it will form part of the outcome of the review.

I take the points made by the Deputies. I outlined the changes that have been made to the scheme since March in terms of the new form, the screening, the new telephone line and also the introduction of a case tracking process. We will have the work completed on the review of the scheme in advance of the finance Bill and I will take on board the concerns of the Deputies as I do that work.