In the current economic climate, the government is taking steps to encourage investment in high-tech companies. Investments in such companies would be subject to a special tax arrangement, greatly reducing the tax burden that would arise on any profits that are made. The rate of tax on individuals and partnerships making such investments would be 15%, while companies that invest in high-tech businesses would pay a rate of 12.5%. This would be well below the existing capital gains tax rate of 22%.
While such measures are a positive indication of the government’s efforts to stimulate investment in start-up companies, I believe that a more radical step in a slightly different direction is needed. My proposal is to exempt from capital gains tax sums which are re-invested in Irish-owned, Irishbased, environmentally friendly businesses or in research and development (R&D) in the area of green technology.
Economies that invest in R&D have a far better foundation and are better placed for coping with an economic downturn.
Investment in green technology and environmentally friendly businesses would enhance the competitive position of the Irish economy and, in addition, would contribute towards creating a sustainable environment for our own and for future generations.
While Ireland has benefitted greatly from foreign direct investment in the past, our attractiveness as a location for such investment has diminished due to the increase in labour and production costs in recent years. We now need to stimulate indigenous industry in sustainable sectors. Experience in the construction industry clearly demonstrates that tax incentives are an effective means of channelling investment in a particular direction.
We now need to supplement our foreign direct investment by adopting a proactive approach in stimulating the domestic industry. In the process, we would become more self-reliant and better able to protect what we have, both in terms of our resources and our people, something which is necessary in the face of the present decline being experienced in both the economic and the ecological environment.