PwC has called for "straightforward" changes to the tax system, including capital gains tax (CGT) reform, to support Irish-owned businesses.
The Big Four accounting firm, following consultation with the DCU National Centre for Family Business and the Family Business Network, said the Government should increase the threshold of capital gains that can qualify for the reduced 10 per cent rate under CGT entrepreneurial relief.
In the UK, the first £10 million of gains is eligible for relief, compared to just €1 million in the Republic.
PwC also urged the removal of an “arbitrary” €3 million cap on the value that can qualify for CGT retirement relief on the transfer of shares for those aged 66 and older.
“Anomalies” in how this relief is calculated should also be removed “to avoid confusion”, it added.
PwC said the Government should introduce a “future use” test to ensure that any business assets - including cash - considered essential for the future success of the business, are not excluded from business relief on the transition of a family business to the next generation.
A 90 per cent cap on capital acquisitions tax (CAT) under business relief should be abolished to provide full CAT relief, similar to an equivalent measure in the UK.
Budget call
PwC said the changes should be made in the budget in October in order to support Irish entrepreneurs and family businesses during an uncertain business climate.
"The Irish tax system has been very successful in supporting the economy through the encouragement of foreign direct investment. However, based on our consultation, there are a number of areas where the Irish tax code could be improved to better support Irish-owned businesses," said Ronan Furlong, a tax partner in PwC's entrepreneurial and private business practice.
“These proposals are straightforward and inexpensive and would help Irish entrepreneurs and family businesses create jobs, retain key talent, raise investment as well as help intergenerational succession,” he said.
This is “even more important” in light of Brexit, Mr Furlong added.
Tax reforms that could boost investment in Irish businesses include an increase in the limits available for relief under the Employment and Investment Incentive (EII), so that it is in line with a more generous UK equivalent.
The 3 per cent levy paid by self-employed people on incomes in excess of €100,000 should also be removed, PwC said.
“It is hard to see any justification for imposing this levy on a class of taxpayer who creates employment and invests in our economy,” said PwC director Declan Doyle.
