Tax incentives call for top IT talent

Tax for employees of IT start-ups should be considered in the budget to assist entrepreneurs retain the best talent, according to a venture capital group.

Tax incentives call for top IT talent

The Irish Venture Capital Association (IVCA) says in a report that €499m had been raised this year for hi-tech SMEs, up 3% on 2016.

Chairman Peter Sandys said the €499m was “an impressive result” considering activity was down 11%, year on year, in the US and that 2016 was a record year in Ireland.

Mr Sandys said while the Irish venture capital community continues to be the main source of funding for innovative SMEs, global finance was also vital.

In its pre-budget submission, the IVCA calls for IT companies and individuals involved in “innovation” to be given tax incentives via employee share option schemes.

The scheme would see no income tax paid on incentive stock options for employees for a set period of time, similar to the US, says IVCA.

It says the enterprise management incentive in the UK, which gives tax breaks on share options to employees of smaller companies, would also work in Ireland, if applied.

Such measures help retain key employees such as engineers, programmers, and designers, it says.

“There are currently no employee equity incentives that are geared towards start-ups and SMEs in Ireland,” says IVCA.

“Equity-based rewards for key employees have been significantly eroded in recent budgets... When compared to other jurisdictions, the regime in Ireland is extremely uncompetitive. It is now very difficult to attract entrepreneurs to establish a business in Ireland.”

The IVCA says international players invested €135m in the second quarter of 2017, bringing the total for the first half to €255m, or 51% of total funds raised, compared to €205m in the first half of 2016.

Of the €499m raised overall by Irish tech firms in the first half of 2017, there was €252m in the second quarter.

IVCA director general Regina Breheny said life sciences again influenced activity in the second quarter, accounting for 50% of funds raised.

Three companies raised over 43% of total funds, while growth and expansion funding was 91% of the total funds raised in the second quarter.

Ms Breheny said: “Since the onset of the credit crunch in 2008, in excess of 1,375 Irish SMEs have raised venture capital of €3.3bn. These funds were raised almost exclusively by Irish venture capital fund managers who during this period supported the creation of up to 20,000 jobs and attracted over €1.37bn of capital into Ireland.”

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