The Small Firms Association (SFA) is calling for big cuts in capital gains tax for entrepreneurs and much more generous breaks for entrepreneurs selling their businesses.
As part of its submission to the Treasury Department ahead of the 2022 budget, the SFA is aiming for tax breaks that will encourage small business investment and help the Irish economy recover from the pandemic.
“Given the all-consuming nature of Covid-19, Ireland’s economy can no longer cope with longstanding barriers for business owners,” said SFA Director Sven Spollen-Behrens.
“The 2022 budget must take decisive action to end discrimination in the tax system against self-employed and company directors. To support the recovery and make Ireland a better country for entrepreneurship, capital gains tax should be reduced from its current 33 percent to 20 percent and the maturity limit for the CGT-Entrepreneur Relief increased to 15 million euros.
The entrepreneurial discharge currently provides for a reduced CGT rate of 10 percent for the sale of qualified assets with a term of € 1 million, so that the proposed change to the SFA would be a radical departure from the status quo.
However, many corporate lobbies have looked for changes to the CGT and other taxes that will affect business owners, arguing that the rates are uncompetitive to the UK and are inhibiting startups and business expansion.
The Family Business Network made similar proposals to lower the CGT and capital acquisition tax to make it easier for families to hand over businesses to the next generation.
Prior to last year’s budget, there was intense lobbying to loosen the CGT regime to stimulate economic activity. Various stakeholders advocated reducing the tax rate by 33 percent or extending the exemptions and facilities to help business owners sell assets without incurring high tax burdens.
But the prospect of easing the CGT was thwarted on Budget Day when ministers instead closed a loophole and denounced abuses of the existing regime.
Finance Minister Paschal Donohoe has relaxed the obligation to participate in the Entrepreneur Relief in order to encourage owners to expand their business with external investments.
But he followed up on that change with a promise to crack down on CGT tax avoidance after officials discovered that companies were exploiting a foreign currency gap.