Written answers

Thursday, 16 October 2014

Photo of Lucinda CreightonLucinda Creighton (Dublin South East, Independent)
Link to this: Individually | In context | Oireachtas source

65. To ask the Minister for Finance his plans to incentivise investment in small businesses when the capital gains tax burden on business has increased by 65% in recent years and if he will support a system, following the US example, where capital gains on assets held for more than 12 months are taxed at a maximum rate of 20%, or Britain where the rate is reduced by its entrepreneurs’ relief scheme to 10%; and if he will make a statement on the matter. [39315/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The rate of CGT is 33% and has been increased four times since 2008 when it stood at 20%. These rate increases were necessary to protect the yield from CGT in the context of the rebalancing of the public finances. In the circumstances, increases in the taxation of capital were considered preferable from the point of view of the impact on the economy as compared to an increase in employment taxes such as income tax. The changes to income tax and to the Universal Social Charge which I announced in my Budget speech on Tuesday last will benefit taxpayers (particularly those on low and middle incomes) and businesses, generally.

In common with all taxes, CGT is subject to on-going review and all reliefs and exemptions are carefully considered. In the circumstances in which we have found ourselves in recent years, and as opposed to embedding major long-term changes to the tax system, the approach (particularly in CGT) has increasingly been to introduce changes which are targeted and which apply for short-term periods to achieve focused outcomes.

Section 45 of Finance (No 2) Act of 2013 provides for a CGT relief for entrepreneurs who reinvest the proceeds from the disposal of assets made on or after 1 January 2010 in certain chargeable business assets. Commencement of the legislative provisions is subject to EU state-aid approval. Discussions with the EU Commission about State Aid clearance have been ongoing but I hope that these will result in a positive outcome in the near future. Notwithstanding that the legislative provisions have yet to be commenced, the CGT relief will only apply, among other conditions, where new chargeable business assets acquired after 1 January 2014  and up to end-December 2018 are disposed of having been held for a minimum period of 3 years after acquisition in that period.

Finally, I announced a number of measures in my Budget 2015 speech which will assist with investment in small businesses. The amount of finance that can be raised by a company under the Employment and Investment Incentive is being increased from €2.5 million to €5 million per annum. The lifetime limit is also being increased from €10 million to €15 million. Among other changes, investment in the management and operation of nursing homes, medium-sized enterprises in non-assisted areas and internationally traded financial services that are certified by Enterprise Ireland will qualify under the scheme. In addition, the Seed Capital Scheme will be re-launched in the coming months. These amendments are subject to the approval of the European Commission.

Comments

No comments

Log in or join to post a public comment.