21 Sep 2021 | 09.00 am
KPMG Urges Support For Family Businesses In Budget 2022
‘Family businesses are embracing the transformation agenda’
21 Sep 2021 | 09.00 am
In the pandemic aftermath, tax policy measures should reward risk and encourage entrepreneurs to grow their businesses and increase employment, writes Camilla Cullinane (pictured) of KPMG
The inherent strength and resilience of Irish family businesses came to the fore once again during the course of the past 18 months. While many businesses have struggled in the face of multiple lockdowns and the other public health measures that restricted trade, family businesses have generally proved very capable at adapting to the new environment.
KPMG published a very significant report earlier this year. Mastering a comeback: How family businesses are triumphing over Covid-19 was based on a survey of 2,500 family businesses globally, including 59 in Ireland. Among the key findings was that 70% of family firms maintained their R&D investments and continued to launch new products and services throughout the pandemic.
It is clear that family businesses are embracing the transformation agenda. Family businesses have proven time and time again to be extremely agile, and we have seen great examples of family businesses pivoting successfully during the pandemic. That agility and ability to reinvent and transform will be critically important as we look forward to the full reopening of the economy in the coming months.
Covid wasn’t entirely negative, of course. One unexpected benefit was the gift of time. It gave family business owners an opportunity to pause and draw breath, and enabled them to take stock of their current position and look at issues such as succession, ownership structures and governance. That breathing space also enabled them to look at new growth and diversification opportunities as well as to develop new product and service offerings. Family firms tend to take a much longer-term view of key business and investment decisions, and their longevity means that they are inclined to embrace sustainability as a core value.
However, every business is challenged by the fallout from the pandemic. While government and other supports have been very welcome, the fact remains that a great number of businesses will emerge from the pandemic with very high levels of debt. Warehoused tax liabilities will have to be met at some stage, and businesses may also have outstanding rent to pay and supplier invoices to meet.
This should be borne in mind by government in the run up to Budget 2022. Irish family businesses, which form the backbone of our enterprise economy, must be supported as they emerge from the pandemic. What is needed now are tax policy measures that reward risk and encourage people to grow their businesses and increase employment.
Budget 2022 provides an opportunity to make small changes that could mean big differences to business. One measure which should be looked at as a matter of urgency is a substantial increase in Entrepreneurs Relief from its current level of €1 million. At a time when Irish entrepreneurs are already struggling with the impact of Covid and other matters such as Brexit, they should be provided with an incentive to continue investing in Irish business. Another, as recommended by the SME Taskforce earlier this year, is to improve the Employment Investment Incentive Scheme (EIIS) by allowing CGT loss relief for loss making investments and providing CGT exemption on EIIS investments.
Business owners should be facilitated to extract profits from their enterprises at more attractive tax rates at various stages during the lifetime of the business. This could come in the form of relief for both investors and owners. For example the SME Taskforce earlier this year recommended a 20% CGT rate for founders, private investors, VC’s and angel investors into SMEs. Owners would be rewarded for the risks they have taken while investors would be incentivised to put their money into indigenous Irish businesses.
To find out more about KPMG family business services, click here.
Pic: Patrick Bolger