The 2013 edition of the Government's action plan for jobs promises “Disruptive Reforms” but the tax measures listed are already contained in this year's Finance Bill and won't cause much in the line of disruption.

The main tax measures referred to in the plan surround the implementation and monitoring of the “10 Point Tax Plan for the Small and Medium Enterprise Sector”. With the possible exception of the increase to the VAT cash receipts threshold, these measures will by and large be ineffective in influencing business behaviour. This is because they do not affect mainstream issues, or because the offered relief is so small that it will make no difference.

For example, EIIS has broadened to include the Hotel industry, and is also extended in time. The problem with the EIIS however is that investment is restricted by reference to the High Earners restriction, and therefore these changes do not address the root cause for the lack of take-up in EIIS.

The Close Company surcharge amendment is another instance of the wrong issue being targeted. Companies wishing to avail of this disruptive reform will be able to save up to €273 per annum under Corporation tax bills. However, the surcharge amendment which would make a real difference to employment would be to exempt foreign owned companies. This is not because of the tax foregone, but because it would constitute the removal of a stumbling block to Foreign Direct Investment.

More interesting are the observations in relation to the Revenue Job Assist scheme, which was abolished in this year's Finance Bill. There was little comment on the abolition of this relief, which offered a tax incentive for the hiring of the long-term unemployed, largely because it was ineffective. Similarly it seems that the more recently introduced Employment Job (PSRI) Incentive Scheme is also to be abolished.

Apparently Revenue Job Assist had 342 employers and 650 employees in 2010. The Employment Job (PSRI) Incentive Scheme was similarly lacklustre – a total of 660 employers were awarded exemptions in respect of 923 employees in 2011. These systems are to be replaced by a thing called JobsPlus. As the press release has it–

“From an employer perspective, the typical value of the incentive over a two year period is circa 23 per cent of the gross minimum wage cost – in effect the State will pay €1 of every €4 it costs the employer to recruit the person off the Live Register. The new incentive will be payable, on a monthly in arrears basis, over a two year period.

It is also proposed to bias the incentive in favour of the more long term unemployed so that the value of the incentive will be set at two levels:

• In respect of recruits unemployed for more than 12 but less than 24 months: €7,500
• In respect of recruits unemployed for more than 24 months: €10,000”

We hope that these new arrangements are considerably more successful than the schemes that they replace.