A lack of awareness around tax-based enterprise supports across the SME sector is impacting the uptake of the reliefs, a new report shows.
The paper from the Department of Finance's Tax Strategy group also states that the perceived complexity of some supports is having a negative impact.
The report contains updates on several tax-based enterprise support schemes, including the Employment Investment Incentive (EII), the Start-Up Capital Incentive (SCI) and the Start-Up Relief for Entrepreneurs (SURE).
These three incentives aim to help SMEs raise finance by providing tax relief to those who make investments in such enterprises.
However, the report shows that the number of companies benefiting from all three schemes dropped in 2022 when compared to the previous year.
161 companies benefitted from the EII scheme in 2022, down from 167 the previous year.
Just 13 companies benefitted from the SCI scheme in 2022, down from 19 the previous year, while just 25 companies availed of the SURE scheme, down from 32 the previous year.
Despite fewer businesses benefiting, the cost to the Exchequer of the EII increased to €52.51m, from €43.81 in 2021. The cost of the SURE scheme also rose, from just under €900,000 in 2021, to €1.03m in 2022.
The paper also provides an update on the Revised Entrepreneur Relief (RER), which aims to improve the environment for entrepreneurs and business people setting up or carrying on business activities in the State.
It shows that 1,335 businesses claimed the relief in 2022 at a cost of €161.7m to the Exchequer. This was up from 1,204 claimants the previous year, at a cost of €142.9m.
Last year, the Department of Finance carried out a targeted review and Cost Benefit Analysis (CBA) of the RER with the support of the Department of Enterprise, Trade and Employment and Enterprise Ireland.
Following the publication of the CBA last year, and as announced in his Budget 2024 speech, the Minister for Finance has tasked officials with identifying "opportunities to refocus the relief with a view to further improving the incentives for founders and entrepreneurs in the innovative start-up phase, and to ensure it is contributing to employment creation".
The paper also provides an update on Accelerated Capital Allowances for Gas and Hydrogen Vehicles and Refuelling Equipment.
The scheme was introduced in the Finance Act 2018 and provides a tax incentive in the form of an accelerated expense deduction, thereby encouraging businesses to choose a lower carbon- emission alternative to diesel and petrol.
Today's report shows there has been a low uptake of the scheme each year since its introduction in 2019. In 2022, 65 claims were made, down slightly from the 66 made the previous year.
The Department of Finance has said it continues to be committed to examining tax-based enterprise supports to ensure that they are fulfilling their purpose of maintaining and growing Ireland's strong SME sector and world-class business environment.
"The Department of Finance has been proactively engaging with stakeholders and colleagues in Revenue and in the Department of Enterprise, Trade and Employment and in EI with a view to continually raising awareness of these supports and their potential benefit to SMEs," it said.
"The Department acknowledges the scale of the changes to various enterprise supports in recent years - both as a result of amendments to State aid rules, and in response to feedback received from stakeholders through extensive engagement," it added.
