EU approval not yet sought for BES plan

The Government has yet to formally ask the EU to approve its proposed extension to the Business Expansion Scheme (BES), which has caused a rift with trade unionists.

Minister for Finance Brian Cowen announced last month that the Government intends extending the scheme and increasing the limit on the amount that individual companies can raise to €2 million from €1 million.

However, the Irish Congress of Trade Unions (Ictu) condemned the move, claiming it is merely a tax shelter for wealthy people and is of no real economic benefit.

It has made a formal complaint to the EU saying that the BES is an illegal State aid. The scheme allows individuals to invest money and claim it against their tax liabilities.

In his Budget speech last month, Mr Cowen said Brussels would have to approve the Government's proposed extension of the business expansion and seed capital schemes.

However, the Department of Finance told The Irish Times yesterday that it had yet to formally seek the EU Commission's approval for the scheme.

A spokesman did say that its officials had "engaged" with the commission, however.

Some sources suggested that it would do this as soon as the Finance Bill is published at the end of the month. That legislation will carry details of the changes to the scheme.

The Government is due to publish a report today showing that of 1,400 companies that benefited from the last scheme, which ended on December 31st, 40 per cent used at least some of the cash raise to create new jobs.

Almost 60 per cent of the companies who raised BES funds were involved in manufacturing, which is seen as an area of the economy that needs support.

Around one in three of those surveyed used the money for research and development, an activity that the Government believes is central to economic development.

Most of the companies that used the scheme were small or developing businesses. A high proportion of them employed fewer than 10 people.

The Institute of Taxation, whose members advise their clients on such schemes, yesterday said the latest report highlighted the fact that the BES supported productive areas of the economy and helped promote job creation. "It shows that this incentive has a number of benefits and they're right across the board," the spokesman said.

Business groups and the Government criticised the Ictu move. Minister for Enterprise Micheál Martin said he reacted with disbelief when he heard about the trade unionists' reaction to the proposal.

Congress is one of the social partners and represents around 28 per cent of the workforce.

The Irish Small and Medium-sized Enterprise group accused the trade unionists of attempting to sabotage the economy.

Ictu says the scheme's extension will cost more than the €178 million estimated in the Budget.