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View from Dublin: No incentive for entrepreneurship

By Brian Caulfield

Published 28/07/2015

Minister for Jobs, Enterprise and Innovation in the Republic, Richard Bruton
Minister for Jobs, Enterprise and Innovation in the Republic, Richard Bruton

In recent months, Minister for Jobs, Enterprise and Innovation, Richard Bruton, has frequently praised Ireland's "great entrepreneurs", while lamenting "we just need more of them".

So you might think that there would be incentives to encourage people to take the risk and start a business. But there are no such incentives. When it comes to taxing entrepreneurs, it's a case of "no good deed goes unpunished".

The main issues are well known. Irish entrepreneurs pay Capital Gains Tax at a rate more than three times that paid by their UK counterparts, while property speculators get a seven-year CGT holiday. Share options in Ireland are taxed at more than five times the rate that would pertain in the UK. If an entrepreneur manages to make over €100,000 (£70,600) in a year, they'll pay 3% more in tax than anyone else in the country.

But our tax system also finds subtler ways to punish entrepreneurs, start-up workers and investors. The story that follows is true and from personal experience, although the identity of the person and company has been disguised:

John was an early investor in TelTech. He joined the board when the company was formed and invested €150k (£106,000). Unfortunately, TelTech needed more time and a lot more money to become successful than originally expected. John was not able to continue to invest and, as a result, his investment was "crushed down". However, the board of TelTech valued his expertise. They could not pay him a fee, but granted him share options in return for staying on the board.

Ultimately, TelTech grew to €30m (£21.2m) of revenue and several hundred staff. It was sold to a major American multinational for €100m. John's options were worth €200k (£141,280). Unfortunately, his investment of €150k returned just €5k (£3,500). He paid tax of €104k (£73,460) (52% including levies, etc.) on his option gain and was €50k (£35,300) down after 10 years service on the board.

The reality is that there is  in the Irish personal tax system. Worse still, the system penalises Irish entrepreneurs, angel investors and workers in start-ups. It's anti-entrepreneur and also plainly unfair. That needs to change.

Brian Caulfield is chairman of the Irish Venture Capital Association and a partner in Draper Esprit

Belfast Telegraph

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