CHANGES to the rate of corporation tax will result in savings of up to £4,000 for all non manufacturing Irish companies next year and aim principally to benefit small businesses.
A new rate of 30 per cent on the first £50,000 of company profits the existing rate is 38 per cent will apply from April 1st.
Where there is a group of companies, the new rate will be levied on the first £50,000 of group profits, the Minister for Finance announced.
This latest measure, aimed at assisting job creation particularly in the small business sector, will cost £1 million in the current year and £23 million in 1997, according to Mr Quinn. In a full year the new tax rate is estimated to cost £31 million.
The tax cuts for small business were broadly welcomed by the Small Firms Association yesterday, which had lobbied for the adoption of a special low tax rate for small business.
The Budget breathed "new life and vitality" into the small business sector, SEA chairwoman Ms Lorraine Sweeney, said last night. The benefits, she added, would reduce the number of business failures and provide an incentive for firms to reinvest in their businesses.
Chairman of the joint Oireachtas committee on small business and services, Mr Michael Creed, said the new corporation tax rate was a tangible appreciation of the contribution made by the sector
The recently formed Small Business and Services Forum also welcomed the increased tax relief, which it said would assist small firms, particularly in the services sector, to expand and create jobs.
The Irish Small and Medium Enterprises Association however criticised the Minister's Budget for failing to live up to its "pro enterprise rhetoric".
In a statement ISME director Mr Frank Mulcahy, said its net effect on the small business sector would be "insignificant". Reductions in employers' PRSI and the raising of its ceiling he said effectively cancelled each other out, yielding no gains for small firms.
In his Budget speech, Mr Quinn said the new tax rate for business formed part of the Government's plan to bring the Structure of corporation tax in line with overseas competitors and followed reductions from 40 per cent to 38 per cent. Manufacturing companies and most companies involved in international services already benefit from a lower rate of 10 per cent, so it is the services sector which will be mainly affected by the new measures.
While conscious of demands from the small business lobby for the adoption of a special tax rate for small enterprises, Mr Quinn said the Government believed these objectives could be furthered by the introduction of the new rate.
"Such a rating structure means that for service sector companies the effective rate of corporation tax will be between 30 per cent and 38 per cent depending on the size of taxable income," he said.
Small and medium sized companies would further benefit, he said, from reductions in the surcharge on the undistributed trading profits of professional close service companies from 20 per cent to 15 per cent.
While savings of some £4,000 will effectively be but small charge for Ireland's largest companies, the new tax rate ensures that the bulk of companies that currently pay the higher rate of corporation tax will benefit most.
Last year, of the 18,200 companies that paid corporation tax official figures show that some 16,100 reported profits of less than £50,000. These companies, according to the Revenue Commissioners, paid £76 million in corporation tax in 1994.
About 2,000 companies liable to pay tax in the Republic declared profits of more than £50,000 last year, according to the figures, accounting for above these levels in 1994.