Fianna Fáil local election candidate for Letterkenny James Pat McDaid, has called for more support mechanisms to help small businesses and the self-employed.
James Pat McDaid
Mr McDaid said the State currently makes almost no distinction between genuine risk takers who set up a new business and take on all the risks that come with that, and passive investments in property based schemes.
“In the last budget the Minister extended the exemption from capital gains tax for land or buildings held for at least seven years on purchases up to 31 December 2014. While this may encourage more buy to let investors into the housing market and land speculators, it does nothing to support a genuine enterprise culture in the country – and these people are the real employment creators”.
“The Minister introduced a very limited relief for entrepreneurs who build up their business from scratch and subsequently sell it on. The relief is extremely restrictive in nature and the fact that the proceeds must be invested in a new business but the second company cannot be involved in an activity previously carried on by the entrepreneur renders it almost useless.
“We know that Ireland does extremely well in terms of foreign direct investment and we give less than adequate importance to business start-ups. According to a Global Entrepreneurship Monitor 2011 study, only 8.5% of Irish people aspire to owning their own business. That is one of the lowest rates in the OECD and is about half that of the US. The reality now is that Ireland is not the location of choice for high potential start-up enterprises and our tax system is partly responsible for this.”
The Glenswilly-based candidate said one practical way the State can affirm the value it places on entrepreneurs is to reduce the rate of capital gains tax that applies when a successful business is sold.
“The rate of capital gains tax has been rising steadily in the last few years but the yield has been falling year after year. Fianna Fáil proposes to cut capital gains tax from 33% to 15% for business start-ups up to a maximum of €10m.
“This would target the measure at local job creating SMEs and help underpin an environment where people with new ideas are encouraged to take the risk of starting their own business. We need to create a culture that celebrates success and we can do this by placing a far greater emphasis on rewarding enterprise risk takers.”
Small and Medium Sized Enterprises
“SMEs are the lifeblood of the economy representing 99.8% of active enterprise, nearly 70% of all employment in the State and 46% of Gross Value Added in the economy. Employment in SMEs for the total business economy fell from 1,045,000 in 2006 to 839,000 in 2011 or to 80.3% of the 2006 level. The sector that was impacted the most was Construction, where SME employment in 2011 was only 38.9% of the 2006 level with almost 128,000 job losses. Industry was also impacted quite heavily with SME employment in the sector falling to 78.2% of the 2006 level which corresponds to over 31,000 job losses. The domestic SME sector is diverse in nature and employs workers with a much wider range of skills than the multinational sector.
“SMEs can range from a small welding business to a local supermarket employing 100 people. The jobs crisis cannot be solved by focusing on foreign direct investment alone and by supporting the SME sector we are ensuring job opportunities for those with traditional skills as well as people with tech qualifications.”
Voluntary PRSI Scheme for Self Employed
“The self-employed currently pay Class S PRSI at a rate of 4%. This entitles them to a significantly reduced range of benefits when compared to PAYE workers. To be eligible for Jobseekers Assistance, a self-employed person must undergo a means test. This can be time consuming with waiting periods of up to eight months. Inaccurate media reports have led some people to believe that they are entitled to nothing because they have no automatic entitlement to Jobseekers Benefit. This has caused unnecessary confusion among the self-employed.
“In the past decade, self-employed people have made a considerable contribution to the country and the economy. The importance of providing support for people who are unemployed or unable to find work by virtue of unemployment, illness etc. cannot be overstated. Extending social welfare protection to self-employed people achieves a measure of social justice. In addition it reduces the risk for those entrepreneurs who wish to start up their own businesses by providing a safety net. This makes perfect sense at a strategic level as well. We are committed to building an indigenous sector based on small and medium-sized enterprises. However, we must put in place structural reforms to do so. Providing social welfare support for self-employed people should be a part of this process.”
“To facilitate this I propose that we allow the self-employed to opt into Class A. In addition to their existing Class S contribution, the voluntary PRSI payment the self-employed person will make will depend on the level of income they earn. The same terms and conditions would then apply for the unemployed self-employed as they do for the unemployed employee. For example, the level of average weekly earnings would impact on the level of rate of Jobseekers Benefit; to receive Jobseekers Benefit for a year would require the payment of at least 260 contributions. I think that this would provide a more equitable solution and it would take some of the fear factor out of the self-employment route.”
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