Over the past few years the Government has introduced a number of changes to the way the tax system treats business owners and high value employees. 

The reasoning behind the moves was that as long as they were not costly, the Government should act to change the tax system if it helped in the creation of jobs, companies and economic growth.

And so the small tweaks were introduced in various budgets at little apparent cost, and the economy grew and jobs were created.  But did the tax changes play much of a role in the economy taking off "like a rocket"?

Not if some stats on the uptake of a number tax measures is anything to go by.

The Foreign Earnings Deduction (FED) - designed to encourage firms to send employees overseas in search of new markets - attracted just 144 claimants in 2014. 

In the same year the Start-Up Refund for Entrepreneurs (SURE) - an incentive for employees to start a business - was claimed by only 59 people.

Income tax relief for key employees engaged in Research and Development attracted even less interest – just 25 people claimed this relief in 2014. 

Then there is EII - the Employment and Investment Incentive - an income tax relief to encourage early stage investment in companies pushing to scale up.  It is a descendent of the Business Expansion Scheme (BES), but has been only half as successful in attracting investors by number, with 1,768 people claiming relief last year.

This less than stellar performance by these tax innovations appears in a weighty document from the Irish Taxation Institute called "A future tax strategy to grow Irish indigenous exports".

It’s a call for some bigger actions in tax policy reform, specifically targeting the Irish SME sector. It’s a policy direction that could have come at any time over the past decade, but is particularly pressing as we face into Brexit – which threatens the main export market for most SME’s here – and likely changes to the corporate tax regime in the US and EU that have implications for Ireland’s highly successful Foreign Direct Investment model.

With the FDI model facing challenge, the ITI argues there is no option but to push for growth in the local SME sector.  They are not the only ones – a plethora of reports making the same recommendation has come from Enterprise Ireland, Forfas, the IMF and the European Commission amongst many others.  Indeed the ITI report draws on many sources. 

But its contribution to moving the debate forward is to come up with some specific actions in tax policy.  It says the 12.5% corporation tax regime has been very successful, but Ireland has "a pattern of sustained high rates across a range of other taxes that are critical for growth and we have tax reliefs that are either not available or not accessible for SMEs".

In short, it wants to see a specifically SME focussed tax relief package, aimed at encouraging the development of Irish owned, technology driven, export companies.

The ITI’s criticism of the personal tax regime is well known – it thinks personal taxes are too high for too many people, particularly business owners.

It wants a phased plan to reform "the overall shape of our personal tax system", including a review of the high marginal tax rates, the breadth of the tax base and the entry points to income tax USC and PRSI.

It has sharpened the focus in this report to look at how the income tax system may hold back growth in one of the fastest growing area of the economy, ICT.

But the industry is reliant on human talent, which is in short supply globally.  Not only can we not supply enough people here to fill the need, but we are in a global competition for talent.

The Government did introduce some relief for overseas hires – SARP (Special Assignee Relief Programme), which eases the burden on international hires.  But there is a catch – and the clue is in the name:  the person who gets the relief has to be assigned to Ireland by a bigger, overseas corporation. 

It’s good for the multinational sector, but not for Irish SMEs, who by definition, don’t have an overseas controlling presence that can assign staff to Ireland.  So the small firms cannot compete for talent with the big boys with SARP.

Nor can they compete with the big boys when it comes to share option schemes. It calls for a "workable" share option scheme for employees in SMEs to attract and retain talent in a cost effective way. Right now an option grant incurs a capital gains tax charge of 33% (the fourth highest in the OECD) – even though the shares may be worthless, as the start-up has no profit or real value. 

The ITI say there are cases where employees have had to borrow money to pay the tax charge on their options when their company is getting going, defeating the whole purpose of share options, which are supposed to be a deferred form of reward.

A second disincentive to holding shares in your employer or own company is that dividends are taxed at the top marginal rate (of up to 55%).  It says most countries tax dividends at a lower or flat rate, and suggests that Ireland follows suit.

The capital gains tax regime is a big target for the ITI.

It claims the 33% rate here is well above the OECD median rate of 23%.  There is an "entrepreneur relief" that reduces this tax for owners who work in the business. But it effectively locks out "angel investors" and other passive investors who will invest money and expertise but who don’t work in the company and so don’t qualify for relief.

This, the ITI says, is a disincentive to invest in Irish companies – something that is particularly damaging as bank finance is hard to come by, and the Government is trying to encourage the growth of non-bank finance across business.

And it’s not just when money is on the way in that CGT has an impact. The high rate, the ITI says, discourages  business owners from selling out and moving on. This is often useful for companies as new ownership can often inject new dynamism, but owners hanging on to avoid a large tax bill can have the opposite effect. 

This, it says, is particularly important if the country is to see a sustained growth in the number and scale of companies that can develop into serious exporters – in other words, ones that operate beyond the British market. Which Brexit may well force more of them to do any way.

Investment in innovation, talent and equipment are essential if Irish companies are to emulate the success of the German Mittlestand  companies (renowned for their long term investment in innovation).

The last theme of the report is a reform of the way the R&D tax credit system works – or rather doesn’t work -  for SMES. 

It says Ireland has an attractive R&D tax regime, but administration barriers are putting a lot of SMEs off.  ITI research by Behaviour and Attitude shows 75% of firms surveyed were aware of the relief, and 20% used it. 

But half of those who used the relief found the process difficult to prepare for and administer. This is always an issue for SMEs, which just don’t have the staff available to tie up in lengthy form filling exercises. 

The R&D relief is quite costly to the Revenue, and they are, rightly, zealous in accounting for it. But the ITI believes it can be made easier to administer, and is supportive of a Revenue Unit that has been set up to try and make this happen.

But there are also problems on the business side. Only 1% of small firms and 16% of medium firms consider themselves to be "R&D active". And the level of innovation among younger firms and new businesses has "flatlined" since 2009, according to the ITI.

Overall R&D spending in Ireland lags far behind countries like Sweden, Germany and France. Strip out the multinational spend on R&D, and Ireland falls to bottom of the class in the EU for research spending as a percentage of GDP (yes, I know – GDP is problematic, but the trend is broadly right).

Of real concern, says the ITI , is that the current relief model restricts outsourcing and collaboration – particularly with Third Level Colleges – a condition it says is at odds with international best practice, which is to encourage collaboration in research and development with the University sector.

Finally some good news:  the ITI notes that the Euro Area is the second biggest export market for Irish owned firms,  after the UK.  And growth in the euro area is picking up – it’s now growing at a faster rate than the US. 

If a more diversified export industry is the way to deal with Brexit, this is a good time to be in the diversification game.