NEW businesses which start trading before April 1st, will not be able to claim certain pre trading expenses, a provision introduced in the Budget, a leading tax expert has warned.
Although welcoming the provision, Mr Brian McDonald, a tax partner with Deloitte & Touche, chartered accountants said the fact that it will only be available from the new tax year, was a "curious drawback", for business who are poised to start trading.
"Such businesses are therefore being presented with a difficult choice, to postpone the commencement of trading to April 1st, to secure a tax deduction for pre trading expenditure - or to commence their trade immediately as planned, and forego the deduction."
Mr McDonald said that in the circumstances it would be desirable if the Minister could see his way towards permitting the relief to operate from Budget Day. "If not, only a fool would start to trade before April Fool's Day..." he said.
Meanwhile, business organisations continued to react to measures unveiled in the Budget. The Irish Management Institute (IMI) said it was imperative that an official announcement is made soon to the effect that the 10 per cent special corporation tax rate will continue to apply to manufacturing activities and other projects in the IFSC and Shannon.
"If an announcement is not made very soon there is a strong danger that decisions will be made which will result in projects being sited abroad," it said.
It argued that although the rate may seem low, even lower rates apply to certain industries in other countries.
The IMI also said the corporation tax rate, although reduced to 36 per cent, was still very high for the service industry. "We feel it would benefit the economy considerably if the 10 per cent rate was extended to service companies outside the EU and if the surcharge on retained trading profits of service companies was finally abolished," it said.
The IMI also expressed disappointment that the Minister for Finance had increased the upper limit for Employers' PRSI by £1,100 from £26,800 to £27,900). "This increase in the upper limit will create an unwelcome increase in wages costs particularly to Irish manufacturing companies which must bear 90 per cent of the cost of the change out of their own resources.
"On balance it is a positive Budget for Irish business" it said.
The Small Firms Association, which yesterday carried out a members' survey on the issue, said the Budget had scored five out of 10 in satisfaction terms.
No company said the Budget would have a negative impact on their business, while 27 per cent said it would help their businesses.
The largest welcome was for the reduction of the 30 per cent corporation tax rates to 28 per cent, for firms who make profits of up to £50,000.
Commenting on the findings the SFA director, Mr Brendan Butler, said that small business confidence remained high and the Budget had not dampened expectations. "However, specific Budget measures are unlikely to result in additional jobs - over and above those already planned - as only 5 per cent of companies said they would recruit extra staff as a direct result of the Budget."
The Irish Small and Medium Enterprises Association (ISME) welcomed the changes in capital acquisitions tax which will make it easier to transfer businesses to other family members. "However, at a time of sustained record growth and buoyant tax revenues it is irresponsible of the Government and the major social partners to condone £600 million of additional borrowing for the purpose of tax breaks and increases in spending," it said.
ISME argued that tax reductions and spending commitments should have been funded by strict control of public spending - "a strategy which the Minister repeatedly, in the Dail and media interviews, stated was not an option because of the negotiated agreements in Partnership 2000".
ISME contended that it gives "the thumbs up to the spending lobbies and will encourage the more militant public sector unions to exploit their privileged position, copper fastened by the authority social partnership confers on them".
