Dáil Éireann Debate, Tuesday - 24 July 2018
309. Deputy Michael McGrath asked the Minister for Finance if there is a cost of removing the split relief under EIIS of three quarters in year one and one quarter in year four and applying a year one relief of 40%; and if he will make a statement on the matter. [34471/18]
Amharc ar fhreagraThe Employment and Investment Incentive provides for relief to an individual who subscribes for shares in a qualifying company. There are a number of conditions, in relation to the company, the investor and the shares, set out in Part 16 TCA, that must be met in order for the relief to be granted. These conditions apply at the time the investment takes place and continue to apply for the qualifying period of four years.
Relief of 75% is granted in the year of assessment in which the shares are issued. The balance of the relief is given in the fourth year following the issue of the shares. It is a requirement when granting the balance of the relief that the number of employees in the company has increased and the average pay rate for qualifying employees has not been reduced. If, as the deputy suggests, the split were removed so that the full relief were available in the first year, this would diminish the employment incentive effect of EII.
Revenue advise me that there are no figures available in relation to the cost of removing the split. In 2016, the average investment per investor was €49,700 and relief is granted at the investor's effective rate of tax. The average investment per company was €415,900 in 2016. The tax cost in 2016 was €32.5m. This tax cost is calculated from the total amount of relief that taxpayers claimed in 2016 for EII Investments.
As the Deputy will be aware, an independent review of EII and Start Up Refunds for Entrepreneurs (SURE) is currently being carried out by Indecon Economic Consultants. I expect that the review will be completed very shortly.
The scope of the review is as follows:
- An examination of the extent to which the objectives of the incentives remain valid.
- An examination of the extent to which objectives of the incentives are being met.
- An examination of the cost effectiveness of the incentives.
- An examination of alternative options which may exist for the provision of state support.
- An examination of the effect of GBER (the General Block Exemption Regulations) on the incentives.
- A comparison of the incentives with similar incentives in operation in other EU Member States in terms of design, objectives, criteria, take-up, impact and cost-effectiveness.
- An examination of whether the incentives, as currently designed, provide a platform for the effective operation of the reliefs.
The review of the design of the incentives should include:
- Possible alternative approaches to giving relief based on the current certification procedure;
- Current investment thresholds and carry-forward rules;
- Amount of relief and triggers for relief;
- The appropriateness and adequacy of the risk minimisation requirements;
- The imbalance of knowledge/control between companies and investors;
- The rules relating to designated funds;
- The interaction of the incentive with other aspects of the tax code;
- The interaction of the incentive with other State supports for SMEs e.g. the R&D/'innovation' requirements; and
- The structure and text of the legislative provisions including definitions of terms.
- Conclusions and Recommendations arising from the analysis.
