Chambers Ireland Sets Out Tax Priorities
16 July 2013
Posted by: Author: Jason Gorringe
Author: Jason Gorringe
Ireland's 2014 Budget should not include any new taxes beyond those already announced, Chambers Ireland has said.
The Chambers' latest Budget submission makes a raft of tax recommendations. High on the agenda is the continued defense by the Government of the country's 12.5 percent corporation tax rate. The submission argues that the rate is a "vital draw" for the foreign direct investment that "generates more jobs per head of population in Ireland than in any other country."
Beyond this, Chambers Ireland suggests that start-ups should be able to offset corporation tax against other taxes due over a five year period. The Revenue Commissioners would not need to lose out financially, but could instead "refund" value-added tax (VAT) in a given year, in lieu of a corporation tax deduction in profitable future years.
Proposed changes to the VAT system feature extensively in the submission. It contends that the Government "should give serious consideration to cutting VAT rates given the ongoing low levels of domestic demand and consumer confidence." It praises the decision to lower the rate paid by the tourism sector to 9 percent, but warns that the Government must "give certainty with regard to the retention of this rate," and suggests that the initiative be extended to other sectors, such as construction.
The Government is also urged to further extend the qualifying amount for companies to use cash accounting. Budget 2013 raised the threshold from EUR1m to EUR1.25m, a level Chambers Ireland claims remains low in comparison to accounting schemes in the UK and Australia. The amount should be raised to businesses with a turnover of less than EUR2.5m. This would not reduce the amount of VAT paid, but rather represent a deferral. A pilot scheme should be launched "at the earliest opportunity," and be "extended to all business start-ups once its efficacy has been established."
The submission generally pays attention to the concerns of small- and medium-sized enterprises (SMEs). Chambers Ireland fears that any increase in employers' pay-related-social-insurance (PRSI) contributions could hit SMEs hard, and impact on job creation and retention. The Government should concentrate on incentivizing, not hampering these processes. To this end, it should consider the introduction of a "Seed Employment and Investment Incentive Scheme," which would offer investments in seed or early stage companies an upfront income tax relief of 41 percent. The Revenue Commissioners are encouraged to do their part, by processing income tax refunds quickly, to improve the cash flow of start-ups.
On a more individualistic level, Chambers Ireland stresses that it is "unfair" for entrepreneurs to pay the same level of capital gains tax (CGT) as established businesses. They should instead face a 16.5 percent rate, which would encourage and reward "risk taking both on business assets and business share disposals."
On the pensions front, the Chamber Network welcomes the Government's commitment to scrap the pensions levy next year. The levy "increased the burden on the provision of pension benefits," sent "a disturbing message to multinational employers who may see this as retrospective taxation," and only encouraged domestic employers to "walk away from their obligations." Were the Government to hike the already top marginal rate of taxation, pension provision at the higher rate would suffer. The Exchequer may benefit in the short term, but tax revenue would ultimately decline as a result of fewer pensions being paid. "Negative adjustments to the tax relief system will increase these challenges resulting in significant reductions in the provision of private pension benefits which will increase the reliance on State benefits in the future," the submission claims. Consequently, the Government should maintain the current system for higher rate taxpayers, but consider increasing the tax relief available to lower paid workers.
Chambers Ireland Chief Executive Ian Talbot commented: "This budget is an opportunity for the Government to support the economy by facilitating better conditions for business that will ultimately sustain and create jobs. After a peak to trough decline in demand of 20 percent, the highest in the Eurozone, an increase in demand will stimulate growth and employment and build consumer confidence."
"The best way to achieve this through Budget 2014 is by introducing no new taxes beyond those already announced. The sooner the Government gives certainty on this issue, the more likely we are to see the positive effects."