PwC urges budget cuts in VAT and PRSI to aid family businesses

Government should cut VAT and employers’ social insurance in Budget 2023 to aid family-owned Irish businesses that employ more than one million workers in total, Big Four firm PwC has urged.

PwC calculates that the Republic’s 170,000 family-owned businesses employ more than one million people.

The professional services firm argues in a pre-budget submission that Government should aid these enterprises in facing challenges including soaring inflation.

PwC says Minister for Finance Paschal Donohoe should cut the Republic’s standard VAT rate to 21 per cent from 23 per cent, to reduce the cost of goods and services subject to the tax.

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The firm also says employers could cover the cost of salary hikes if the Government halved pay-related social insurance (PRSI) for an initial 12 months.

And it argues that income tax bands and credits should be increased, at least in line with inflation.

The firm’s submission calls for increases in civil service travel and subsistence rates to account for inflation and for the State to fully exempt workers’ public transport benefit schemes from income tax.

PwC also recommends changes in taxes on share options schemes, particularly the different approach taken to long and short options.

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The firm says the Government should incentivise businesses to let properties to workers for accommodation purposes. Those should include taxing rents received at 12.5 per cent, half the current rate.

Employers should also get additional reductions for buying or retrofitting green properties, while workers should get extra tax credits for renting such premises from employers.

Taxing inheritance

In other suggested measures, PwC says the threshold for taxing children’s inheritance from their parents should be increased to €500,000 from €335,000.

The Government should also introduce mechanisms to facilitate the transfer of family businesses from one generation to the next without incurring “punitive” upfront taxes.

Nicola Quinn, a tax partner at PwC, said the firm’s pre-budget submission would “support entrepreneurs, making Ireland an entrepreneurs’ first and only choice to set up a business”, she said.

Colm O’Callaghan, a tax partner with PwC’s entrepreneurial and private business practice, argued that businesses needed to stay competitive and viable while supporting their workers in dealing with inflation. “A clear focus for support is also to ensure that Ireland continues to be a great location for private business,” he said.

Budget measures that boosted the Republic’s attractiveness to private investors would be very welcome, Mr O’Callaghan added.