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High personal tax rates are holding back the establishment and growth of businesses and stunting job creation, a major report warns today.

Ireland needs to slash personal tax rates to create jobs and secure a Brexit dividend as the UK leaves the EU, according to leading entrepreneurs.

Nearly three-quarters said the overall cost of doing business in Ireland, coupled with the high rate of capital gains tax, is dampening entrepreneurial activity, according to the report from accountancy and consulting giant EY published this morning.

Ireland is set to be one of only two English-speaking countries within the EU, along with Malta, once the UK leaves the trading bloc in 2019. Making the most of that opportunity will be key to the future prosperity of Ireland’s entrepreneurs, according to the EY report.

Some 59pc of the 160 entrepreneurs surveyed said agencies such as the IDA, Enterprise Ireland and Invest Northern Ireland helped them do business, while 57pc said the agencies had helped them penetrate other European markets.

But 72pc cited the punitive personal tax rate as a significant obstacle to growing a business.

That tax burden – which bumps any single person earning more than just €32,800 a year into the high 40pc tax band – has been frequently criticised by chief executives as being a major deterrent to luring staff and executives to Ireland.

In the UK, a single person does not enter its 40pc tax band until they earn more than £43,001 (€50,624) a year.

In Germany, a 42pc personal tax rate for a single person doesn’t kick in until they are earning more than €54,058 a year.

Kevin McLoughlin, partner lead at EY Entrepreneur of the Year Ireland, acknowledged that “strides have been made to foster entrepreneurship in Ireland, particularly through incentives such as the recent changes to corporate tax exemption for businesses in the start-up phase”.

But he added: “We still have a long way to go to improve Ireland’s personal tax competitiveness and compete to retain the exceptional entrepreneurial talent that is being created here.”Rewards

He said that while entrepreneurs contribute to Ireland’s economic prosperity, 76pc of those it surveyed believe the Government isn’t doing enough to support entrepreneurship.

“At the moment, entrepreneurs suffer a higher tax burden than those in employment, so this is an area that needs to be tackled head on by Government,” said Mr McLoughlin.

“In doing so, Ireland’s economy will reap the rewards through increasing the amount of capital available for investment, helping to reduce upward pressure on wages, and encouraging the creation of wealth through growing businesses in Ireland and increasing employment.”

While 54pc of entrepreneurs said Ireland’s education system was a positive, 57pc said that recruiting experienced staff had been a challenge, with 43pc saying they had struggled to compete for talent against large multinationals.

Still, 77pc of entrepreneurs surveyed said they increased their headcount in the past 12 months, with the same proportion planning to grow their workforce in the next year.

Mr McLoughlin said the battle for talent is impacting all businesses. “This, coupled with the fact that basic salaries and non-cash benefits can’t be delivered tax-efficiently in Ireland, creates a further challenge for entrepreneurs,” he said.
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