Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank the Deputy for raising this matter this afternoon. I recognise the key role that Irish small and medium-sized enterprises, SMEs, play in creating employment in our economy. SMEs account for almost two thirds of employment in the enterprise economy, and it is for that reason that I have introduced and extended a wide range of tax measures to encourage productive investment in SMEs and to promote the growth of small enterprises.

The Government has sought to diversify sources of investment for the SME sector and recognises that the tax system can play an important role in this regard. That is why I have expanded the employment and investment incentive, EII, which provides income tax relief on investments of up to €150,000 in SMEs, in successive budgets. In budget 2013, the incentive was extended until 2020 while in budget 2014, the incentive was removed from the high earners' restriction. In budget 2015, the incentive was further expanded to cover a greater array of businesses and permit companies to raise more capital. The level of investments made under this scheme is rising and it is expected that this trend will continue.

In budget 2014, I introduced the capital gains tax entrepreneurial relief, which provides CGT relief for serial entrepreneurs who use the gains from one investment to invest in a new firm. In the same budget, to improve access to non-bank funding for SMEs, I exempted transfers of shares for companies on the enterprise securities market of the Irish Stock Exchange from stamp duty. The latter provision is subject to EU state aid approval.

To further encourage entrepreneurship and ensure that new entrepreneurs can invest in their own start-ups, the seed capital scheme will be rebranded as StartUp Refunds for Entrepreneurs or SURE. As the Deputy may be aware, under this scheme, an employee who leaves PAYE employment may claim a refund of income tax already paid in respect of their investment in their new incorporated business. The information leaflets are being simplified and the scheme will be the subject of a marketing campaign to be undertaken by the local enterprise offices.

Corporation tax relief is available for new start-up companies in the first three years of trading. This allows new firms reinvest their profits into expanding their business. The relief was extended in the Finance Act 2014 for one year, and my Department is currently reviewing this scheme with a view to further improving its operation.

The measures I have outlined to the Deputy were designed to improve the tax environment for investment in small enterprises. I have introduced measures to assist SMEs in other ways in recent budgets. These measures include introducing of the 9% rate of VAT for tourism-related services and abolishing employer PRSI on share-based remuneration as part as part of the jobs initiative in 2011; increasing the cash receipts basis threshold for VAT to €2 million in budget 2014; increasing the de minimis amount that can be retained by a close company without giving rise to a surcharge in budget 2013; enhancing and extending the foreign earnings deduction to new qualifying countries in budgets 2014 and 2015; introducing the start your own business initiative to assist entrepreneurs who have previously been long-term unemployed; introducing the home renovation incentive in budget 2013 to create economic activity which aids small construction companies; expanding the annual excise relief production ceiling for microbreweries; and removing the base-year restrictions on the research and development tax credit in budget 2015, which removed a significant administrative burden from all companies which use this incentive. I would also point out that Ireland has low rates of employer social insurance contributions when compared to our EU partners. As a result, the cost of hiring a new employee is one of the lowest in the European Union.

Tax reliefs and reductions constitute a loss forgone to the Exchequer. At a time when there is still a requirement to correct the public finances, I would suggest that we should continue to direct what are limited resources towards assisting entrepreneurs and small firms through focused tax reliefs.

I make the general point that companies invest when they anticipate that demand will increase in the future. As SMEs primarily supply the domestic market, they are particularly reliant on domestic demand. The income tax and universal social charge deductions introduced as part of budget 2015 will increase citizens' disposable income and correspondingly increase consumer spending in the domestic economy, encouraging SMEs to invest and expand. With a growing economy, increasing employment, expanding supports for entrepreneurs and a low corporation tax regime, I believe Ireland is a good place in which to set up a business.

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