Lucinda Creighton (Dublin South East, Independent)
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I thank the Minister for taking this Topical Issue. I wish to raise the deeply uncompetitive environment which exists to encourage productive investment in Irish small and medium-sized enterprises, and the deeply unfair and inequitable taxation system in place for the self-employed. I genuinely believe most Irish people are not aware of the fact, and would be shocked if they knew, that an employee who earns €15,000 pays €285 in tax through PAYE, USC and PRSI whereas an employer, who has taken the risk to establish a company and all of the attendant stress and headache which goes with it, pays a total of €2,235 in taxation on the same amount of earnings. This is 684% more for the self-employed person on the exact same wage as the employee. Why is it that an employee earning €50,000 pays €14,585 in tax, while an employer pays €16,235 in taxation on the same earnings, which is 11% more? An employee on €100,000 pays €40,384 in tax whereas an employer who earns the same amount pays €42,034, which is 4% more. These are startling figures.

They send out a negative signal to the people we need to continue creating jobs and who we desperately need to grow their businesses and ensure a sustainable recovery for this country. It strikes me as quite perverse that we single out the self-employed, the people to whom politicians from all sides of this House pay lip-service on a daily basis. We talk about entrepreneurs, the need for entrepreneurship and the need for people to take a risk and go the extra mile to set up or develop a business, yet we are hitting them with punitive levels of tax. In some instances, a self-employed person pays 684% more in tax than a person who is their employee on the same wage level.

It is all very well to talk about the small business people and both Government parties did so to a significant extent in their respective manifestos before the last election, but neither party nor any other party in this House currently proposes to introduce any tax equity or tax fairness for small business people. Such a move would help them along the road and encourage them, and say to them that we do not think they are crooks and gangsters and fiddle the system but rather that we believe they are the sort of people we need in our society to create jobs and opportunities and develop our economy long into the future. I find it perplexing that the Government can claim that it supports entrepreneurs when our tax policy explicitly discriminates against them. We are exporting entrepreneurs and the people we need to invest in Irish small business. That is tragic. It is true of our jobs tax policy with PRSI and our investment policy with punitive levels of capital gains tax, which are totally out of kilter with the rest of the modern developed world. We are taxing families who want to help their children start businesses through capital acquisitions tax. It is really unfortunate and I look forward to hearing the Minister's response.

Michael Noonan (Limerick City, Fine Gael)
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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.

Lucinda Creighton (Dublin South East, Independent)
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I thank the Minister for his reply. I am aware of all the various schemes and many of them are extremely complex. Much of the feedback I have got from small businesses is that they are inaccessible or they do not qualify for them. There are a huge number of hurdles and obstacles to accessing many of the schemes the Minister mentioned.

I am glad he mentioned the 9% rate of VAT because it has been a successful policy decision of this Government and one I have supported. The Minister will recall that in advance of last year's budget I wrote to him and lobbied him in order to retain the 9% level. It demonstrates how very focused, targeted tax measures do work. My concern is that the very focused, targeted taxation measures have been focused very much on the construction and building sector during the past three to four years rather than the SME sector. Very simple changes could be made, which would not cost the Exchequer greatly but would make the environment for self-employed people much fairer.

I know these figures never find their way into Government press releases. We always hear about the foreign direct investment company that has created 20 or 50 jobs and there is almost a rush of Ministers to be there to cut the ribbon. The figures we do not hear about, but which I am certain the Minister is well aware of, are those from the Central Statistics Office, CSO, which in August 2014 showed that the number of self-employed people who employ others in their company has decreased. That is a very worrying trend at a time when there is so much emphasis on start-up companies and the need for new companies, which is obviously very important. The fact that the small and medium-sized enterprise sector is not employing the same number of people as it was in 2011 and that the number has dropped is a huge cause for concern. It goes against the trend of our having greater levels of employment in this State to see self-employed people being reduced to one-man operations because they cannot afford to retain staff. That is a massive cause for concern. I hope we are not papering over those cracks and that the Minister will deal with that and confront that very worrying trend.

Michael Noonan (Limerick City, Fine Gael)
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I think everybody knows that the SME sector was under pressure as a result of the disastrous policies pursued by the Fianna Fáil and Green Party Government where the economy crashed. If GDP goes down by 20%, is it any surprise that the number of SMEs in the economy will go down as well and that there are closures? Some of the CSO figures to which the Deputy referred are historic and the SME sector is building up again.

I have given a lot of encouragement, through the tax system, to the SME sector. It does not involve just construction, but the tourism industry, farming, retail and smaller service industries such as software industries, IT companies and financial services. We have concentrated efforts right across the sectors. The difference between the growing economy now and the economy we had during the Celtic tiger is that the Celtic tiger economy was dependent on one sector, which involved building, development and speculation on building, and the taxes it generated. The latest set of statistics show that all sectors are now growing and contributing to the 5% growth in GDP in 2014. We will continue that policy.

I agree with the Deputy on one area, which is something we inherited. The introduction of the PAYE allowance in 1980, while well-justified through the 1980s, created a differential between those paying PAYE and the self-employed, and that differential needs to be examined when resources come to hand. I agree with the Deputy's analysis in that space. It is not something that was created by this Government or magnified by it, but it is something of which it is aware. I will take her views into account when we are preparing the next budget.