Budget 2022: Supporting the indigenous sector

PwC’s Nicola Quinn on the importance of supporting our indigenous sector on the path to recovery and renewal.

Irish SMEs and family businesses employ some 45pc of the workforce in Ireland. The dynamic and structure of these private companies is fundamentally very different to that of multinationals.

Our indigenous companies work side by side with our multinationals and they rely on each other for support and services. We need both sectors to survive and thrive so we have a strong diversified economy.

“We must sufficiently support our private business sector to enable it to grow at scale to become truly international”

Many of Ireland’s private businesses operate in retail, hospitality and food, the sectors most impacted by Covid-19, and these companies have also been impacted by Brexit and the supply chain disruptions we are now seeing.

We must sufficiently support our private business sector to enable it to grow at scale to become truly international.  We need to ensure that we continue to have a diversified economy as between our indigenous and multinational sectors. 

We would like to see more targeted supports for this important sector addressed in Budget 2022, to enable investment and to set these businesses on a path to recovery and renewal.

Employment maintenance

The supports provided by Government since the start of the pandemic has been welcome and has protected employment. It is important as we reopen that we continue those supports such as the EWSS (Employee Wage Subsidy Scheme) into 2022 to avoid any cliff edges for businesses that are just getting back on their feet. It is also essential that the tax warehousing scheme is extended to give businesses time to get back to growth before they have to repay the warehoused taxes.

Most companies are challenged by a shortage of key skills, but indications are that the private sector is more challenged to retain key people.

We would like to see the modernising of Ireland’s tax offering for employee share ownership which is falling a long way behind international peers including vital changes to the Key Employee Engagement Programme (KEEP) to offer employees a viable mechanism to invest in their employer’s business.

We would like to see clearer measures relating to the valuation of the shares to make the grant of KEEP options more certain and, given there are limited opportunities for exit, share buybacks should be taxed under capital gains tax. 


Current industry practice is that private equity partnerships are the default vehicle through which private equity investments are made. The Employee Investment Incentive (EII) legislation should be modernised to accommodate these investment structures, in order to unlock a wall of savings and foster an equity portfolio culture in Ireland, under an investment framework that is already highly regulated and respected internationally.

EII would be enhanced by allowing USC tax relief on qualifying EII investments, or alternatively, by allowing capital gains tax loss relief if the investment fails.

We would also like to see a a targeted relief designed to stimulate new investment whereby

companies within the charge to corporation tax can claim a 130pc first year allowance on most new plant and machinery that ordinarily qualify for capital allowances including processingequipment, production machinery computer systems and commercial vehicles

Succession planning

Succession planning can be a key blocker for family businesses to flourish over the generations.  We would like to see: 

  • The removal of the arbitrary €3m cap on the value which can qualify for Retirement Relief on the transfer of shares for those aged 66 years of age.
  • More creative measures could also be introduced, like those in the UK, which allow an ‘upfront instalment’ of gift/inheritance tax with any balance of tax being spread over a longer-term period of at least 10 years.
  • Ireland’s capital gains tax rate is among the highest in the world. The intention of Entrepreneur Relief is to encourage serial entrepreneurs to establish new companies. This is a simple and effective way of giving someone with an entrepreneurial spirit more after-tax proceeds to re-invest in building a new business. Simply put, the current lifetime limit for entrepreneurs of €1 million is out of kilter with the marketplace, and in most cases does not provide sufficient incentive for entrepreneurs to dispose of their businesses and reinvest in new businesses.  We would encourage an increase to €5m at the very least to back Irish entrepreneurs to do more of what they do best.
  • We also would like to see a temporary reduction in the rate of Capital Gains Tax and Capital Acquisitions Tax to stimulate economic activity, but this is looking unlikely at this stage. 

Climate change

Ireland’s private business sector also has a huge opportunity to grab the opportunities of climate change.  Investment is needed and resources are limited. 

Tax policy can influence the decarbonisation journey and Budget 2022 can support this with a suite of well-designed “green” tax measures. 

For example, we would like to see a time limited ‘super deduction’ until 31 December 2023 for capital expenditure on all plant and machinery and capital expenditure on buildings/factories that receive a recognised accreditation for overall energy performance.

While we recognise that not all of these suggestions may be possible given the limited resources available, nevertheless, we would like to see some clear messaging from Government in Budget 2022 that they are committed to supporting indigenous business.

Nicola Quinn
Nicola Quinn is Tax Partner in PwC’s Entrepreneurial & Private Business Practice.