INTRODUCING A NEW scheme that would allow workers to easily buy shares in their employers’ companies could hugely benefit small Irish businesses.
That’s according to the Small Firms Association (SFA), which said that Ireland should look to copy a similar scheme already in operation in the UK to encourage people to buy shares.
In its pre-Budget submission, which was formally launched today, the SFA said that the current system that deals with employees buying shares in the businesses they work for is confusing and largely unworkable.
“Just 6% of employees in Ireland are shareholders in the company where they work, compared to the EU average of 21.7%,” it said.
“A scheme similar to the UK’s Enterprise Management Incentive is needed for new and small firms in Ireland.”
The submission added: “The scheme should be simple and easy to understand. It should waive the income tax, USC and PRSI due. Instead, employees should only be taxed on the capital gain from the sale of the shares.
“Furthermore, owner-managers should have the ability to target the share-based remuneration scheme at key individuals in the business rather than being obliged to open it to all employees.”
It estimated that the cost to the state of introducing such a scheme would be relatively low – between €1 million and €5 million “in future years”.
The SFA said that this initiative would provide a range of benefits to small Irish businesses.
“This measure has the potential to improve management capacity in small business, which is a persistent contributor to the 50% failure rate among new businesses in their first five years,” it said.
“It would also improve staff retention and productivity in small and new firms, in particular at senior levels, by providing a long-term incentive and increasing employee buy-in.”
The Department of Finance has previously looked at introducing a better share-based remuneration scheme, although several hurdles have been identified, such as the increase in capital gains tax to 33% in recent years.
Several other organisations and prominent business people, such as Mazars tax partner Cormac Kelleher, have said that they would be in favour of a new share-based remuneration scheme.