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The time is now to tackle the frictions holding back Ireland’s start-ups. Sort out the mess around CGT and share options decisively, urges John Kennedy.
Hey Leo, hey Paschal! Congrats on the new jobs.
You don’t know me, you’ve never met me, but I have a favour to ask.
I’m asking you because you represent a new Ireland that embodies change, intelligence and progress.
‘The only way we can compete with multinationals for employees is to give workers share options but, if that’s impossible, then it’s no good. We need to get these structures right. That’s what will keep Irish companies growing jobs in Ireland’
– BARRY LUNN
Leo, you’re evidently a self-made politician and, as an Asian man and a gay man, you have broken through every previous conservative taboo, hierarchy and stereotype of political life in Ireland to take your place as the nation’s leader. Respect. That is already an incredible legacy.
You represent a brave new nation. You represent change.
And Paschal, as Minister for Finance, Public Expenditure and Reform, you clearly have your finger on the pulse of what’s going on, and you are going about your tasks with the characteristic dedication and good humour we have come to appreciate in you.
Both of you clearly have hopes and ambitions, and you want to see this country excel. I do, too.
And that’s why I’m asking you to consider giving indigenous Irish businesses a fighting chance by tackling the enduring crisis around share options and capital gains tax, which is holding our entrepreneurs back.
Just last week, the European Commission gave Sweden permission to remove income tax on stock options for companies of fewer than 50 workers.
I’m asking you to do the same if you want to see start-ups emerge from Ireland and become future household names internationally.
Seriously, this could be one of your best legacies.
House in order
You have your plate full. The UK is at it again, being all obtuse and unneighbourly, our hospitals and the way they are run is unbecoming of a supposed first-world nation, and the criminal warlords won’t stop squabbling.
As you know, this country has fought long and hard to have an economy that gives its people the standard of living they deserve. And, despite the best efforts to ruin it almost 10 years ago when people partied too hard and lost the run of themselves, you and your colleagues have done an outstanding job in putting the house back in order again.
You may or may not realise it – well, of course, you must – but you had help. The majority of working people in the past decade or so have helped to put the house in order, too.
They got up early, as you say. They endured pay cuts, USC charges and redundancies. Many lost hours and hours of sleep, worrying about keeping the lights on and the wolf from the door.
But every day, they squared their shoulders, got into their cars or hopped on their buses or bikes, did their jobs and paid their taxes. They came home again at night, embraced their loved ones, kissed their kids goodnight and told themselves, ‘I will try harder again tomorrow’.
They’ve been doing this for 10 years now and this so-called recovery the papers and the radio claim is happening means nothing to them. The drudgery continues. The beat goes on and the beatings will continue until morale improves.
There is no Croke Park agreement for people in the private sector, and half of them aren’t even paying into fancy pension pots. Imagine what kind of ticking time bomb that represents! You guys have your plate full.
But you also have a couple of aces up your sleeve, don’t you?
Firstly, as I said, you have the Irish people. Generally, when we aren’t praying, whingeing or talking about the weather, we are a fun lot. We are also inventive, creative, artistic, inspirational and we are pretty much adored wherever we go. It’s universal. For some reason, we are charming and can sell anything to anyone when we put our minds to it.
Those fine Irish minds have landed the country some incredible industries and companies that want to invest here. There are about 2m people at work in Ireland and that’s a long way from the trough of despair in 2012, when 15.1pc of the population were unemployed. Unemployment is now down to 7.5pc. That’s amazing, Leo and Paschal, but you already know that.
Multinationals such as Google, Intel, Eli Lilly, PayPal, Amazon, Microsoft, Facebook, Apple and Merck directly account for one-fifth of private-sector employment in Ireland. For every one job in these companies, there are a further three jobs in the local economy. That’s a lot of people going into their local shop to buy bread and other necessities every day, isn’t it?
There are some other incredible facts: Ireland is now the seventh-largest exporter of medicine and pharmaceutical products in the world, with the amount of products exported annually reaching €39bn. Did you know that? Of course you did.
Did you also know that Dublin has become a mini Silicon Valley or a twin to San Francisco with some amazing Frisco companies located here such as Slack, LinkedIn, Dropbox, Intercom, Stripe, Twilio, Airbnb … the list goes on.
A fighting chance
But did you also know that you have an amazing, indigenous version of this industry on your own doorstep, led by Irish people doing incredible things?
Did you know that every time one of the big Silicon Valley companies announces an expansion in Dublin or Cork that the CEO of an Irish start-up somewhere sighs inwardly, knowing that there is no way he or she can easily match these companies for perks such as free food, fancy offices and share options?
Did I mention share options up until now?
Seriously, Irish businesses are in no position to offer their workers decent share options to prevent them running off for better pay and perks without taxing them punitively.
If you think there is a talent war raging in the world of multinationals, then realise that the real cannon fodder are indigenous companies that simply cannot compete.
It gets worse. Did you know that if an Irish company is acquired by a bigger tech company, either locally or from overseas, the founders get almost zilch for it because capital gains tax (CGT) in Ireland is out of whack with the UK and some Scandinavian countries? Yes, you read it right, founders and employees get zilch. Sweet fanny all after years of sacrifice.
Reforming Ireland’s antiquated share options and CGT rules would give your indigenous companies a fighting chance and an opportunity to build businesses that could last the test of time.
Not only that, but if employees are compensated for their sacrifices, then maybe they too will be in a position to invest in creating new companies and more jobs, rewarding further generations of empowered, motivated workers. Wouldn’t that be amazing? Wouldn’t that be some legacy?
Last week, I spoke to a chap called Barry Lunn, who is speaking at Startup Grind in Limerick later this week. Lund co-founded Arralis, a company in Limerick that is just three years old, and already employs 35 people, selling technologies to the aerospace industries. It recently landed a €650,000 deal with the European Space Agency and has also secured €50m worth of investment from investors in Hong Kong. Arralis could one day be an industrial giant. And it was born here in Ireland and created by Irish people.
“We need to be realistic,” Lunn told me. “If we want home-grown companies to flourish, then there are lots of things we need to sort out. We need to make Ireland a good place to start a company. It still isn’t the most attractive place to start a company. Share options are important and Ireland isn’t good for that. Capital gains tax? Ireland is not a good place to exit or take money off the table. In Ireland, we are competing with Google and others who are good employers and they pay well. The only way we can compete with multinationals for employees is to give workers share options but, if that’s impossible, then it’s no good. We need to get these structures right. That’s what will keep Irish companies growing jobs in Ireland.”
Leo and Paschal, you have it in your power to do something about this. Very soon, you are about to be flooded with budget submissions from well-heeled lobbyists and the like. But I’m getting my submission in before anyone else.
Just last week, as I mentioned, the European Commission gave Sweden the go-ahead to eliminate income taxes on share options at start-up companies. Companies with fewer than 50 employees won’t be taxed on share options! That is outstanding, it is brave and progressive, and that’s exactly what needs to happen in Ireland.
Until then, indigenous companies are going to war with one hand tied behind their backs.
And it isn’t just indigenous start-ups. There is competition all over the world to encourage start-ups from other places – such as Silicon Valley – to relocate to Ireland. As you know, Brexit is looming and UK companies – especially fintech ones – may need to relocate to a friendly EU nation that would welcome their prized employees.
Wouldn’t it be wise to deal with these CGT and share options frictions decisively right now?
Sorting these issues out with schemes to rival Sweden or the UK would lay the foundations for companies that could endure, staffed by well-compensated employees with the motivation to get up early every morning and do the impossible.
Those people are this country’s backbone. They deserve to be compensated.
Now wouldn’t that be an incredible legacy?
