While Brexit uncertainty prevailed, this year’s Budget introduced some welcome support for business to innovate and thrive for years to come, says Ian Guider
This article was first published in the November/December 2019 Ireland edition of Accounting and Business magazine.
It was almost impossible to escape Brexit overshadowing Ireland’s 2020 Budget. Analysis of Paschal Donohoe’s speech revealed no fewer than 50 references to either Brexit or no deal. Given that wider backdrop, some of the more progressive measures to help business may have been overlooked in the commentary.
Many of these are small changes that cost little and several will pay for themselves over time. It’s an acknowledgement that entrepreneurs and business owners play a critical role in the Irish economy – even if they are not as important as foreign direct investment.
Prior to the Budget, a number of groups in the startup community, represented by a body called Scale Ireland, made a submission to the finance minister seeking incentives for growing Irish business. The key four requirements were: improvements to the R&D tax credit; extending the Employment Investment and Incentive scheme, changes to the Key Employee Engagement Programme share option incentive; and improving the capital gains tax regime for entrepreneurs to sell their companies.
In the end, Minister Donohoe acted on three of these and also promised a review of capital gains tax, although the threshold was kept at €1m. Of all of them, I think the changes to the R&D tax credit will have the biggest impact on many startups, even if these take a number of years to come to fruition.
The Special Assignee Relief Programme (Sarp), aimed at incentivising companies to move senior executives to Ireland, has also been extended. I’ve seen criticism from some in political circles that it has been abused, but the data doesn’t back that up. For a cost to the Exchequer in 2017 of €28m it has attracted some 1,000 employees, mostly in the finance and technology sectors. As Ireland competes with many other countries to win financial services firms moving out of London, Sarp’s importance is growing.
If there are regressive moves, it is increasing the dividend withholding tax from 20% to 25%. Ireland is a nation of savers at a time when interest rates are facing a prolonged period of being lower for longer: investment should be encouraged, not taxed. Similarly, the introduction of 1% stamp duty on companies acquired through schemes of arrangement is also a backward move. Ireland has benefited enormously from an influx of investors in recent years.
The cost will be borne by vendors who will see lower purchase prices as those acquiring factor the stamp duty in to the purchase price. That the implementation of this was immediate is disappointing and indicates a lack of regard for investors.
Ireland faces headwinds in the year ahead and not just from Brexit. Global corporate tax changes and an uncertain world require policy responses to encourage Irish businesses to react. Budget 2020 may have been dominated by Brexit but the incremental steps to help businesses navigate the year ahead are to be welcomed.
Ian Guider is markets editor of The Sunday Business Post.