The ‘unfairly stacked’ tax system against family businesses

Ireland’s tax system is “unfairly stacked” against family businesses, the Family Business Network has claimed.

In a submission to the recently created Commission on Taxation and Welfare, the network said the Republic currently has the third highest capital gains tax (CGT) rate in the OECD (Organization of economic cooperation and development), one of the lowest entry rates. points for the marginal income tax rate and one of the highest VAT rates in the world.

“From the heavy tax burden imposed on the succession of family businesses to an uncompetitive income tax regime, family businesses in communities across Ireland are limited in their ability to compete internationally “, did he declare.

Reducing the headline CGT rate, she said, would increase investment in the indigenous jobs sector and increase tax returns to the Treasury.

He urged the commission to cut the standard CGT rate from 33% to 20% in a bid to boost investment in the sector.

He also called for the removal of ‘barriers’ surrounding the succession of family businesses, suggesting the commission consider temporarily reducing the Capital Acquisitions Tax rate to 20% for two years and raising the lifetime cap. for entrepreneurial relief to 5 million euros.

Amid the state pension debate, he warned against attempts to use only the employer’s PRSI to replenish the social insurance fund, which he would see as an unfair tax on new jobs .

John McGrane, Executive Director of the Family Business Network, said, “As the largest employer in the state, family businesses want to help develop a tax system that not only encourages sustainability but also the growth of local businesses.

“We believe the Tax and Welfare Commission offers the opportunity to do just that,” he said.

“But it’s essential the commission tackles the punitive cost of doing business in Ireland with the tax system unfairly stacked against family businesses.”

Mr McGrane said family businesses are calling for a constructive overhaul of Ireland’s tax system.

In an open public meeting on Wednesday evening, Commissioner and economist Tom McDonnell said the commission had received more than 200 submissions – 82 from organizations and 135 from individuals – in a recent consultation process. public.

Dr McDonnell said the submissions dealt with a wide range of issues, including ownership, proposed site value tax, corporation tax and its sustainability in the future; pensions and social insurance rates, and the possibility of introducing a wealth tax.

Regarding income tax, he said a number of respondents felt income tax should be increased for high earners, while others felt it should be reduced.

The high cost of childcare and how it was a barrier to working in Irish society was also highlighted in several contributions, he said.

There have also been submissions on the need to tax high-emitting polluters as part of the state’s transition to a low-carbon economy, including the possible use of road user charges and congestion, but also on how the state should help communities make a “just transition”.

Stephen Kinsella, a member of the Commission and an economist at the University of Limerick, told the meeting that a more extensive site value or property tax would be “extremely beneficial” in curbing speculation associated with land, which has made drive up real estate prices and rents and that it was part of the government gift to engineer it.

Anne Gunnell, director of tax policy at the Irish Tax Institute, told the meeting that tax competition was changing as a result of the OECD Global Tax Agreement and that there would now be more emphasis on the marginal cost of employment in various countries. She said relatively high state income tax rates made Ireland uncompetitive.

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