Kieran O'Donnell (Limerick East, Fine Gael)

We discussed this proposal at length on Committee Stage. Will the Minister indicate what he would expect the cost to taxpayers to be if this concession were available to sole traders at the marginal rate as well as at the lower rate to limited companies? The majority of people who set up in business do so as sole traders rather than limited companies. I understand the Minister's emphasis on control in terms of limited companies, getting high-tech companies establishing as limited companies and so on. However, there is a worry that this could force sole traders to establish limited companies to avail of the relief. In the majority of cases, smaller companies pay little or no tax in the first few years. The danger will be that we will have limited companies making losses and forced to take salaries out to meet day-to-day living expenses. They will gain very little from setting up as limited companies rather then sole traders, and that could jeopardise the financial viability of their businesses. A majority of businesses take, in the main, about five years to establish. The first three years are critical, invariably from the point of view of cashflow. The small amount of tax they may have to pay might be the difference between surviving and not surviving. They are already under pressure in terms of getting money from the banks.

The Minister should take the comments of Deputy Bruton on board and come up with a hybrid form of what he is providing for a limited company. I can see the merit, in terms of structures for companies with a high worth which are entering high-tech areas, many of which will be established as limited companies. However, we are in a recession and if the Minister wants to encourage people to become self-employed, the majority will set up as sole traders. It is a pragmatic and reasonable suggestion for the Minister to take on board. He could introduce a form for the sole trader at the standard rate or a lower rate. There should be some form of equity vis-À-vis the limited company. I would like to hear the Minister's thoughts.

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