Worldwide, Ireland is renowned for its 12.5% corporation tax rate and in turn attracting multinational companies such as Google, Apple and Facebook. This influx of multinational corporations has proved beneficial with regard to job creation – the desired effect of this low tax rate. However is this preference towards multinational companies having a detrimental effect on Ireland’s small and medium sized entrepreneurs?
Globally Ireland’s 12.5% corporation tax rate has come under serious scrutiny; such is the effectiveness of this tax rate. However the need to implement a more advantageous tax system, combined with a change of supports and incentives for indigenous businesses must be a current point of interest for the Irish government.
As it stands there is effectively a disincentive for entrepreneurs to set up small and medium businesses here in Ireland. It may in fact be said that the current tax system actively penalises entrepreneurs as they do not receive the standard employee tax credit of €1,650 which reduces income tax liabilities on their earnings. Even though these entrepreneurs are taking on all the risk of establishing a business, they do not receive the tax credit allowance which all other employees in Ireland receive.
After supplying Irish citizens with employment it should be imperative that entrepreneurs would receive adequate cover when finding themselves in difficult times. However there is currently a serious lack of social welfare supports for entrepreneurs who find themselves in these situations.
Entrepreneurs also find themselves paying an additional Universal Social Charge (USC) of 3% on top of all their current personal taxes; in some cases taking their personal tax rate to 55%. When this is all said and done, after possibly supplying other citizens with work, taking on additional stress and risk, along with added taxes with less tax credits, entrepreneurs often find themselves liable to a 33% capital gains tax (CGT) when winding down the business.
It is time for the Minister for Finance, Michael Noonan, to assist and provide an incentive for indigenous entrepreneurs to establish their own business. This is of utmost importance to extend the economic recovery to all corners of Ireland, and in particular to small towns and villages where SMEs are the main source of employment.
Words by Jamie Fortune