Business last night welcomed the stay of execution given in the Budget to tax breaks that support start-up enterprises. Barry O'Halloran reports.
The Minister for Finance, Mr McCreevy, said in his seventh budget speech yesterday that he intended to extend the lives of the Business Expansion Scheme (BES) and the Seed Capital Scheme (SCS) to 2006.
Both schemes give tax relief to investors in start-up and expanding Irish businesses and had been due to end on December 31st. Mr McCreevy also increased the limit for funds that projects can raise under the schemes to €1 million from €750,000.
The State's largest business group, IBEC, welcomed the move, saying both schemes were vital to the success of many start-up companies. Mr Cathal Friel, chairman of the the Irish Software Association (ISA), said last night that outside Enterprise Ireland aid, the schemes were the only source of funding available for early-stage businesses in that sector.
The ISA had called for the investment limits to be increased to €2 million. However, Mr Friel said the group welcomed yesterday's increase. "Many companies have raised the maximum level of funding under the existing BES limits and raising more investment offers the potential of new jobs," he said.
"By 2006 we would feel very confident that the funding environment will be radically improved and there will be less need for these schemes by then."
Information technology group, ICT Ireland, echoed Mr Friel's reaction. Both the Small Firms' Association and the Irish Small and Medium-sized Enterprises association (ISME), welcomed the decision to extend the schemes.
Business also welcomed a proposal aimed at encouraging multinationals to locate their regional head offices and holding companies here. This will involve exempting the sale of subisidiaries from capital gains tax (CGT) and expanding the scope of double taxation relief for dividend income paid by subsidiaries.
Deloitte and Touche tax partner, Mr Pat Cullen, described the move as "very significant" and said Ireland was one of the few EU countries that did not provide a similar incentive. In a statement, IDA Ireland said that it would put the State on a par with EU competitors for inward investment.
The organisations representing small and medium-sized businesses voiced most criticism of the Budget. Both ISME and the SFA singled out the 5 cent increase in excise on petrol and diesel as an additional pressure on their members' costs.
SFA director, Mr Pat Delaney, said the increase would add €25,000 a year to the fuel bill of a small distribution company with 10 vehicles. Mr Delaney added that organisation would have preferred to see inflation brought down below 2 per cent to guarantee wage moderation.
ISME said it was disappointed with the overall package, which it said would do very little to reward risk taking, and would not improve the position of indigenous businesses. Chief executive, Mr Mark Fielding, criticised the fact that the "benchmarking fiasco" would be allowed to continue, but said it was pleased the level of Government spending would be kept within 5 to 7 per cent over the next number of years.
IBEC director general, Mr Turlough O'Sullivan said last night that at macro level, the business assessment was positive. He said that Mr McCreevy had struck a reasonable balance, going for the minimal impact on inflation and aiming for a prudent €1.6 billion deficit.
