Minister for Enterprise Micheál Martin has reacted with "utter disbelief" to the decision by Ictu to lodge a formal complaint with the EU over the Business Expansion Scheme (BES) and the Seed Capital Scheme (SCS).
Minister for Finance Brian Cowen announced an increase in the tax-deductible amount that can be invested in the schemes from €31,000 to €150,000, while the amount a company can receive was raised from €1 million to €2 million.
Ictu economic advisor Paul Sweeney said yesterday Congress was not opposed to investment
Micheál Martin
incentives but claimed the changes, which were announced in the Budget, were "expanded vehicles for tax avoidance for wealthy people".
He said the level of allowance meant the schemes amounted to state aid, which required European Commission approval.
But Mr Martin said today the expansion of the BES was intended to assist small businesses to grow and create.
"The expansion is in line with the proposal of the small business forum which has been working and considering the issues facing firms over the past 12 months," he said. "The suggestion that the scheme would be used as a tax avoidance measure flies in the face of the reality that anyone who invests in business is taking a risk."
He invited Congress to meet to discuss the issue.
There has been public disquiet for some time over the amount of wealthy people paying little or no income tax during the Celtic Tiger years by using a variety of investment loopholes.
Earlier this year, figures from the Revenue Commissioner showed several millionaires used a variety of loopholes to avoid paying any income tax in four tax years between 2000 and 2003. Many more wealthy people paid very little income tax by availing of a range of reliefs.