Budget 2017: Caulfield says capital gains tax cut is ‘peanuts’

11 Oct 201677 Shares

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Pictured: serial investor and entrepreneur Brian Caulfield

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Serial investor and entrepreneur Brian Caulfield has slammed the latest reduction in capital gains tax in Ireland’s 2017 Budget as ‘peanuts’.

In this afternoon’s (11 October) Budget for 2017, Finance Minister Michael Noonan, TD, outlined an expected reduction in capital gains tax (CGT) from 20pc to 10pc up to a limit of €1m in chargeable gains. Cosmetically at least, this sounds similar to the UK’s rate but is, in fact, still very far removed.

“I will review the €1m lifetime limit in future budgets. All other aspects of the relief remain unchanged,” Noonan promised.

‘If they were going to do something that small I would have preferred if they increased the cap beyond €1m rather than simply reduce the rate on the first million’
– BRIAN CAULFIELD

“This is pretty minimal,” said Caulfield, a partner at leading $9bn Silicon Valley venture capital firm, Draper Esprit.

“If they were going to do something that small I would have preferred if they increased the cap beyond €1m rather than simply reduce the rate on the first million.”

He pointed out that if an entrepreneur sold a company for £10m in the UK, that entrepreneur would pay £1m in tax.

However, if you made a €10m gain from the sale of a company in Ireland, you would qualify for 10pc up to a limit of €1m in chargeable gains.

This means the tax on the sale of a company is reduced from 33pc down to 31pc in Budget 2017.

“Which is pretty meaningless compared to the UK where you would pay three times less tax.”

Caulfield is an established entrepreneur and was an early investor in Movidius which was recently sold to Intel for a reported $300m.

Prior to being a venture capitalist, Caulfield sold Exceptis Technologies, an electronic payments company, to Baltimore Technologies in November 2000 for US$26m. Six years later, he sold Similarity Systems, a data quality company, to IT giant Informatica Corporation for US$55m in cash.

Caulfield also served as interim CEO of Belfast mobile cloud firm Aepona. Intel acquired that company for US$120m in 2013.

Caulfield last year slammed the reductions to CGT in the Budget of 2016 as derisory.

Time is running out as Irish entrepreneurs eye the UK

Caulfield said that while he noted Minister Noonan’s intention to review the €1m cap, the timing is a disappointment.

He also said it was disappointing that plans to review Ireland’s policy towards share-based remuneration of employees and plans to introduce an SME-focused, share-based incentive scheme are being shelved until next year.

‘It is not a flood but it is definitely happening’
– BRIAN CAULFIELD

“It is being kicked to touch for another year, that is a disaster and disappointing for so many companies.

“They say they are working on it but it could be 2018 which means yet another year and I’m not even sure if the present Government will last that long. Where will it leave us if we have another election in the meantime?”

Caulfield said that on the bright side, the decision to increase the earned income tax credit for self-employed workers and directors of companies by €400 is a step in the right direction. But it still falls far short of the €1,650 tax credit for PAYE workers.

Caulfield warned that Irish start-ups locating in the UK to avail of more beneficial and realistic tax treatment is no mere threat.

“It is not a flood but it is definitely happening.

“There is no question that Brexit might slow it down a bit but Irish start-ups are also attracted to the UK EIS scheme which makes early-stage capital much more readily available in the UK.

“There are definitely companies choosing to go to London rather than set up in Dublin for these reasons,” Caulfield warned.

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com