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Micro firms tax credit could create 80,000 jobs

A targeted tax credit for firms employing fewer than 10 people could create 80,000 new jobs at no net cost to the exchequer and reduce the current unemployment rate to 6%.

In its pre-budget submission, Dublin Chamber called on the Government to offer an employer’s PRSI tax credit for the first three years of a micro-company’s existence in order to incentivise employment growth.

Employer’s PRSI is applied at a rate of 10.75% on each new staff member taken on.

The current situation whereby the tax is consistent for all companies, regardless of their size, is prohibitive to smaller firms taking on new hires, according to Dublin Chamber chief executive, Gina Quin.
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“The Government’s current approach to employer’s PRSI often makes it just too big a risk to take. Removing the PRSI burden will get more people working in small businesses. If each of the 80,000 micro businesses in Ireland hire just one extra person it would bring the unemployment rate down by a third,” said Ms Quin.

The PRSI tax credit would come at a gross cost of €300m to the exchequer, according to a chamber spokesperson.

If just one-in-five new hires came from the Live Register, however, break-even point would be reached whereby no net cost would be incurred by the exchequer as the State’s coffers would be swollen by additional income tax receipts.

The chamber said it welcomes the Government’s reported greater focus on encouraging entrepreneurship in the upcoming budget but warned that more must be done to support entrepreneurs and owners.

To achieve this, and to bring Ireland’s tax set-up in line with what is on offer to entrepreneurs in the UK, the chamber’s submission includes a recommendation to introduce an entrepreneur capital gains tax relief, which would see a 10% rate applied, similar to the UK Entrepreneurs’ Relief.

“Dublin Chamber has noted an increase in the number of businesses seeking to relocate from Ireland to the UK. Over the past five years, the UK has rolled out the red carpet for foreign entrepreneurs by introducing a swathe of tax improvements and incentives for young companies. “The Government here must follow suit. Unless action is taken, more Irish entrepreneurs will be enticed to Northern Ireland or mainland UK,” Ms Quin said.

The chamber’s submission comes as new figures show an economic pick-up is being felt among SMEs with increased business confidence and profitability expectations among a host of positive indicators.

The report by the Irish Small and Medium Enterprises Association (ISME) paints a largely positive picture of the SME sector but warns of “clouds on the horizon” which could derail the recovery.

Chief among the association’s concerns is the anticipated recommendation by the Low Pay Commission which is expected to call for a 50c increase in the minimum wage to €9.15.

“Government has stated that our recovery will be export-led but in order to make this happen, they will need to help reduce our business costs back into line with our international competitors.

“Irish businesses cannot compete effectively on the international stage if they are forced to pay wages, rents and utilities that are far higher than international norms,” ISME chief executive, Mark Fielding said.

Article Source: http://tinyurl.com/kbwqb42


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