Ireland is a country fast becoming a victim of its own success. Never before has a country in Europe experienced such a rapid growth in both wealth and population. The influx of foreign nationals in recent years has closed the gaps in the lower echelons of the unemployment scale and forced many Irish people to either enter full time education or emigrate in search for lower-skilled work elsewhere. But while this is in no way reminiscent of the mass exoduses in the 1950s and 1960s in Ireland, today it is the newly qualified in Ireland’s youth who take up the mantle of immigrant.
Our beloved country is one which has become a world power in terms of leading political advancements. The Tobacco Act of 2004 was a huge milestone in Irish culture, effectively banning the use of cigarettes indoors. This is now being adopted by most European countries in some form, with France now joining the parade to stamp out the cancer of the social classes. But while Ireland does contribute good and fair policies to its people and the world, we are adept at killing the offspring of our success, the baby Celtic Tigers.
The word ‘entrepreneur’ is a French derivative of the word ‘to take’. Today it is a word few people have the same definition of. I like to think of an entrepreneur as someone who takes a chance to capitalise on something he/she thinks the world will need. Two weeks ago the entrepreneur who started one of Ireland’s biggest recruitment agencies won the Ernst & Young Entrepreneur of the Year award at a ‘glitzy’ ball in Dublin. But while this ceremonial occasion served to highlight some of the success stories of Irish business, few seemed to put their finger on the pulse of the young Irish people and figure out why Irish people are no longer starting their own companies. There are of course many reasons for this. Some people believe it is a lack of belief in their own creation that causes them to be unwilling to take the full weight of risk in entering the global market for goods and services. More however believe that it is due to the high start-up costs of business in Ireland.
I believe it is a direct response to the complete and total nightmare that is the Irish Revenue system. Taxation in Ireland is a far cry from simple economics. The Revenue service here is a force to be reckoned with and they don’t take fools gladly. For a start, we here pay the highest Value Added Tax rates in Europe, and have some of the highest proportional rates of Excise and Stamp Duty in Europe also. This all serves to swell the coffers of the Irish political system, which is now experiencing one of the highest collections in recent years, and probably the highest ever. Ireland has long since paid off its European aid and National Debt and next year is to become a net contributor to the European Union, giving back what we have benefited from.
But all this seems to filter down to the high rate of taxes that we as citizens pay. On a recent working trip to Germany, I learned of the nation that pays almost 50% of its income on taxes, however this is a system in Germany which is largely due to its shrinking population. Ireland on the other hand is experiencing an annual increase in population, totalling about 5 million people according to the last census. I remember the 1996 census showing 3.5 million. That’s 1.5 million people of an increase in 10 short years. While it’s conceivable that this is due to our success, a major factor for consideration in this is the high increase of non-Irish immigration into Ireland. Politicians would have you believe that more and more Irish people are returning, however I have yet to meet one of these people.
The truth is that Ireland is being patched up by the immigrants who fill the roles in society that many of us believe are beneath our successful abilities. What is a direct and more often than not discarded truth in all of this is the complete disregard for the solution to the immigration and migration of young Irish people. Lack of infrastructure in the regional areas of Ireland is leading to a surge to cities and large towns from rural Ireland. And the reason we can’t promote our national resources of talent, education, skills and risk-taking is because of a tax system that serves to prevent market entrance.
In Galway alone, almost all of the successful and large business I know of are run or owned by accountants. Why is this? For years I have believed that accountants are some of the most boring and habitual creatures to walk the earth, yet now I realise that it is due to their innate understanding of the tax system. October 31st is the deadline for self-assessment income tax payments, but who really understands it? If I help a friend who in turn gives me €100 for my aid, does that constitute money that I should pay tax on? Or am I spending enough on tax through my petrol, road tax and everyday groceries and clothing? Have I paid enough tax through my vehicle registration tax? Is there a possibility that my television license is over-priced? Maybe the airport fee on my international flight ticket is enough tax? Have I paid enough tax to the government for having two debit and two credit cards? How do you know?
Well one thing is for certain, the Revenue services are not going to tell you. Their multitude of online websites are a myriad of clicks and spins and dead ends. The information is written in such brutal English that it serves to baffle the user. The humble phone call to your local revenue offices is akin to a treasure hunt of different phone numbers in order to find where the ‘X’ might be marked, only to find that it’s 3pm and that person is gone home for the day.
For an Entrepreneur, income tax, employers PRSI, VAT and local government taxes and rates must all be paid. And each year an auditor must peruse your accountancy practices to ensure you’ve paid the correct amounts – a service which is hideously expensive. So if you decide that you are going to start a company producing the amiable widget, and invest heavily in the capital requirements in the first and second years, of course writing the capital acquisitions off as tax benefits, paying your local council tax and then figuring out how much employers PRSI you must pay, when do you actually pay yourself? Is it not inconceivable that for the first 5 years of your business you will earn less than what you did as an employee? Is it possible that in the midst of the pressure to secure contracts that you forget to account for the dinner you had with your client and subsequently get a knock on the door from the Revenue services demanding all your accounts and financial records for the previous 10 years?
Who would do it? I’ve certainly had my share of brilliant entrepreneurial ideas in the recent past. I’ve made many attempts to start a business of my own. I’m wise to the world of business and have an innate knack in running businesses. But frankly, I need help. I need a system where I can live, breath, work and conquer the business world, without the permutations, additions, subtractions, transactions and appropriations that go with keeping a company alive.
If anyone out there wonders why Ireland is losing its businesses on a weekly basis, don’t blame the high operating costs of wages and fuel, blame the complex and ludicrous tax system that aims to fire darts at them from all directions. I’m not advocating an Enron-type system, but the Sarbanes-Oxley document was brought in to prevent fraud and it turns out its preventing more than that. It’s preventing business and opportunity.
diarmy
