CGT reduction for new business on the way

The Government will introduce a reduced Capital Gains Tax rate for entrepreneurs starting up new companies in the Budget on Tuesday.

Jobs Minister Richard Bruton argued very hard for a lowering of the CGT rate from 33 per cent to 20 per cent for entrepreneurs who invest in their companies.

While the Department of Finance is said to be agreeable in principle, the Bruton rate is unlikely to make it to Budget day, with a compromised rate ultimately likely.

Bruton has been keen to incentivise anything that will improve the creation of jobs and sources have said he and Finance Minster Michael Noonan are “on the same page”.

The Minister for Finance had previously sought submissions from his Fine Gael party colleague about near cost-neutral ways of stimulating employment and sources have said he likes the idea of this relief for entrepreneurs.

Given that CGT receipts have “flatlined” since the 2008 crash, the opportunity cost of lowering the rate for start-ups is small and means it is the best time to introduce the measure.

Lowering CGT for entrepreneurs is similar to an initiative introduced in the UK in 2010.

“It’s about sending a strong signal from Government that we are genuinely trying to create jobs and be inventive about how we can do that,” said one well-placed government source.

Details of the limits of the new relief have not yet emerged, but it is likely that it will be put together with a series of measures to aid the construction sector.

Government sources have said that Noonan is strongly considering lowering the VAT rate for the construction sector to 9 per cent.

Small businesses make up over 90 per cent of the entire enterprise economy, with 70 per cent of the workforce employed by SMEs. Support for this sector is long overdue, especially with recent figures showing that the amount of new loans to small companies has fallen 82 per cent since the peak.

Last week, an Institute of International Finance/Bain Report into small business lending across Europe, found that Irish companies had suffered by far the biggest credit famine. Source: The Sunday Independent.