SFA lead calls for CGT reduction to 20%

The Small Firms Association (SFA) believes a reduction in the rate of Capital Gains Tax (CGT) from 33 per cent to 20 per cent will unlock investment and make Ireland an attractive place to sell successful businesses.

Within its pre-Budget 2016 submission, the SFA revealed the current 33 per cent rate of CGT makes the nation less appealing to those looking to sell a business and reinvest in the Irish economy.

AJ Noonan, chairman, SFA, said: “Ireland has one of the highest rates of CGT amongst developed economies at 33 per cent.

“This puts Ireland at a competitive disadvantage when it comes to attracting and retaining mobile investment.

“The SFA is calling for a reduction in CGT to 20 per cent across the board. History has shown that a lower rate of CGT substantially boosts the overall tax take, so the Exchequer will also benefit substantially by such a move.”

The SFA believes the current CGT Entrepreneurial Relief scheme is “overly restrictive and will not work in its current format”.

Within its submission, the SFA suggests that the relief is amended to mirror the UK scheme, where CGT of 10 per cent is due on the sale or closure of all or part of a business – on the condition that the entrepreneur has held the share for at least a year and is a director, partner or employee in the business.

“It is critical that there is at least equity in treatment between employees and proprietary directors/self-employed people if entrepreneurship in Ireland is to flourish,” added Noonan.

Mr Noonan noted that this could be achieved by simply putting a stop to the three per cent USC surcharge that applies only to the self-employed; allowing proprietary directors the PAYE tax credit providing they pay tax on a PAYE basis; and introducing a voluntary PRSI contribution to enable entrepreneurs to have a social welfare safety net in line with their employees.

Date published 18 Aug 2015 | Last updated 18 Aug 2015