Michael Noonan (Limerick City, Fine Gael)
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First, section 16 contains two amendments to the principal Act. The first item amends item 47A of Schedule 25B to the Taxes Consolidation Act 1997 to provide for the temporary removal of the employment and investment incentive from the high earners' restriction. The restriction ensures that a minimum rates of tax is paid by high income individuals by limiting the amount of tax relief that can be claimed in any one year. The employment and investment incentive provides tax relief for investments in small and medium-sized enterprises, SMEs, in recognition that such investments are risky. As a temporary stimulus measure, amounts subscribed for shares under the employment and investment incentive between budget day 2013 and January 2017 will not be subject to the high earners' restriction. At the end of this period, a review will be undertaken to ascertain the effectiveness of the measure. At that point, a decision will be taken on whether these investments should return to being subject to the high earners' restriction or whether they should continue to be excluded.

Both Deputies Boyd Barrett and Pearse Doherty have argued in the Dáil in the course of other debates that there is a dearth of credit to SMEs and that the banks are not providing sufficient credit. I believe the Deputies agree with me that alternative credit to bank credit for SMEs should be explored. While the old business expansion scheme was in place, high earners invested in risky investments in SMEs and this employment and investment incentive is the replacement for the business expansion scheme. I am attempting to encourage people of high net worth to invest in risky investments in SMEs in order that an alternative to the bank credits, which quite frequently is not available, will be available for SMEs. In addition, there is a cap of €150,000 on the investment in this regard. Consequently, it is not the case that people can put in astronomical amounts of money, as there is a restriction it. I believe it is worth finding out whether this will provide equity to SMEs. Many SMEs now are accessing credit and bank credit but because of the crisis, they have very little equity and because of the way in which property values have gone, the equity base they had in respect of property is now negative. If they could build up equity, it would help the SME sector. These are the economic reasons for doing it and the risk is limited because of the cap on individual investors of €150,000 and then there will be the review after three years. If I, or whoever is here in three years' time, finds it is not working, is being abused in any way or is not stimulating equity investment in SMEs, then I assure Deputies it will be taken out of the code again.

The second item deals with Deputy Doherty's point. The Deputy's amendment would, as a consequence, delete section 16 but there is a second amendment in that section that deals with capital allowances on plant and machinery, which is leased to a manufacturing trade by an individual as part of his or her leasing trade. This currently is not one of the reliefs that are subject to higher earners' restrictions. The amendment provides that where those allowances are being claimed by passive investors, then there will be a specified relief for the purpose of the high earners' restriction. Active traders will be unaffected. This is an anti-avoidance measure to prevent passive investors from using the relief in a manner for which it was not intended. The point I was making in reply to Deputy Doherty was that because his amendment implies the deletion of section 16, the anti-avoidance measure also would be deleted, which neither I nor the Deputy wants.