Budget 2014 - A line in the sand?

Morgan McKinley 21.10.2013

I attended the Irish Tax Institute's budget breakfast briefing this morning and after the main facts were presented, an expert panel provided their commentaries and analysis on the budget. One such opinion was that this year's budget provided a line in the sand and I have to say I agree with this analogy.  

It is easy to forget that this is the 7th austerity budget for Ireland, and already a significant effort has been made in reducing the government deficit and a return to the international markets.  It is also important to point out the taxation adjustments needed to be made were cut from €3.1b to €2.5b, so the starting target was already positively reduced.  

This year's budget has not escaped austerity and many will feel the brunt again. However the many measures implemented in this one, in fact a total of 25 measures, are aimed at supporting entrepreneurship, jobs and growth.  The construction and building sector has benefited greatly, as has the tourism, farming and agri-food sector. 

For employees, it was welcome news to hear that there are no changes in the rates or bands for income tax, Universal Social Charge or Employee PRSI.

Finally Minister Noonan reiterated that the Government is 100% committed to the 12.5% corporation tax rate again. This will not change. He also announced the publication of an International Tax Strategy Statement which sets out Ireland’s objectives and commitments, in relation to international corporate tax issues. This has already received positive press in the international media. 

Here are some of the key features of these positive measures:

  • No changes to CGT rates
  • Introduction of a targeted CGT incentive for business investments.
  • Start your own business relief
  • Relaxation of the application of the High Earners’ Restriction to encourage investment in the Employment and Investment Incentive Scheme (EIIS)
  • Transfers of shares of companies listed on the Enterprise Securities Market (ESM) of the Irish Stock Exchange will be exempted from stamp duty (currently 1%)
  • Various amendments to the R&D tax credit improving the scheme and encouraging innovation
  • VAT cash receipts basis has been increased to €2 million to improve cash flow
  • The reduced rate of 9% VAT for tourism-related goods and services is being retained
  • The rate of the Air Travel Tax will be reduced to 0% from 1 April 2014
  • The “Living City” urban regeneration initiative is being extended to include residential properties constructed up to and including 1914 and certain areas of the cities of Cork, Galway, Kilkenny and Dublin
  • A new Home Renovation Incentive scheme is being introduced. Homeowners who carry out renovation and improvement work on their principal private residence in 2014 and 2015 will be able to avail of an income tax credit of 13.5% on qualifying expenditure
  • CGT Relief on property investment is being extended to include properties bought up to 31 December 2014
  • Farmers VAT flat-rate addition is being increased from 4.8% to 5% with effect from 1 January 2014
  • Review of farmer taxation - The Department of Finance and the Department of Agriculture, Forestry and the Marine will conduct an independent review of the agri-food and fishery sector in 2014 “to ensure that tax reliefs are focused on those areas where they are needed most”

Although the above measures are positive, I would recognise there is a lot more to do. It is still an austerity budget and for some groups, not enough was done in terms of reliefs and benefits.  I still believe we pay too much tax overall but for now, it is fair to say, a line in the sand has been drawn and Ireland can look positively into the future.  

Do you agree?

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