Institute presses for innovation

The introduction of "targeted tax incentives" to encourage greater participation in profit-sharing schemes would reward employees who were the economy's driving force, the Institute of Taxation states in its pre-Budget submission.

The proposal involves the establishment of a trust by companies where a proportion of profits would be held for a three-year period after which employees could cash in their share. "Any increase in the value of their share over the three years would be subject to tax under the Capital Gains Tax rules rather than the income tax rules. In this way, employees would be able to benefit directly from their employer's improved performance as if they actually held shares in their employing company," the institute states.

The institute also calls for an increase in the overall pensions contribution limit for tax relief and greater flexibility in claiming tax relief when making contributions as a means by which investing in pensions could be made more attractive. The Revenue Commissioners' performance in enacting the self-assessment taxation system was defended by the institute's president, Mr Pat Cullen, who said the 10-year-old scheme was looked upon as a model by other countries.