Ibec, the group that represents Irish business, today said the next government will need to introduce major tax reform if it wants to encourage more people to start their own companies. Publishing a detailed set of policy recommendations on entrepreneurship in advance of the election, Ibec said claims by the major political parties to support small business and start-ups now need to be matched with firm manifesto commitments.
Ibec said Ireland continues to excel when it comes to attracting multinational; this focus now needs to be applied to supporting indigenous firms. Indigenous firms account for only 43% of GDP, 36% of business investment, 25% of our corporation tax and about 15% of our exports, despite making up 98% of the enterprise base. Tax reform has a big role to play in shifting the balance. Ibec is calling for the income tax system to treat the self-employed the same as PAYE workers, tax incentives to encourage investment in Irish companies and a simplified R&D tax credit system.
In advance of the upcoming general election, Ibec with Amarach Research looked at how people felt about a government’s experience on business issues and about their own attitude to business and entrepreneurship. The overwhelming majority (77%) said government should have a minimum number of people with business experience sitting at the cabinet table.
Respondents also indicated a preference for their own children setting up their own business, when asked where they would like them to work when they grew up. 28% said they would like their children to be self-employed with their own business, as opposed to the public service (21%), a large multinational (21%), a large Irish company (18%) or an SME (12%).
Ibec Senior Economist Gerard Brady said: “It has become easier to start a business in recent years, but it remains difficult to grow and scale a business. What we now need is concerted, targeted support to make it easier and more financially attractive to grow new indigenous business.
“Between 2008 and 2012 the total number of private sector employees fell by 264,000, however companies trading for less than five years created 106,000 net new jobs. The important role of these firms is not adequately reflected in the tax system. Improvements made to the tax treatment of entrepreneurs in Budget 2016 were important, but were only a start. All political parties now need to match the rhetoric on supporting entrepreneurship with concrete manifesto commitments.”
Ibec’s new report, Taxation of entrepreneurs – priorities for the next government, recommends:
Equalise the personal tax treatment of the self-employed and owner managers with their PAYE counterparts
Make targeted changes to investment taxation to make investing in indigenous Irish business a much more attractive proposition
A simplified R&D tax credit so that smaller firms are better able to overcome funding constraints on their innovative activity and R&D
Reform the taxation of share options to make it much easier for high potential small firms to attract key talent.