Budget 2014 – An Opportunity Lost?
The following is a commentary on the budget by Aidan Byrne, tax partner, at Baker Tilly Ryan Glennon.
This afternoon the Government delivered Budget 2014 with the key goals of job creation and exiting the Troika bailout programme. With the introduction of a range of pro-business measures the Government is putting its faith in entrepreneurs; SME’s and MNC’s to create the jobs that will return Ireland to economic growth.
Entrepreneurship, Innovation and investment were announced as the pillars of the Budget and initiatives have been introduced to drive these goals.
According to Aidan Byrne, Tax Partner with Baker Tilly Ryan Glennon “Measures to encourage entrepreneurship include a Capital Gains Tax (CGT) relief for individuals who re-invest the proceeds of asset disposals in productive assets (e.g. new trading company) and a Start Your Own Business (SYOB) incentive whereby individuals, who have unemployed for a period of 15 months, start up a sole trade will receive an income tax exemption up to €40,000 per annum. These are welcome measures; however, key to their success will be the availability of finance to business owners and start-ups.” In this regard the removal of the Employment and Investment Incentive from the high earners restriction and the increasing of the threshold for applications that can be reviewed by the Credit Review Office are welcome. Also, by increasing the DIRT rate to 41%, the hope is that people with large sums on deposit will begin spending and consuming the products and services of these new businesses.
“The reaffirmed commitment to the 12.5% corporation tax rate, whilst not unexpected, is very welcome. The Government used the occasion to announce the issue of a policy document on Ireland’s International Tax Strategy and has committed to being part of the solution with regards to the tax avoidance strategies used by certain multinationals. This is an important development given the negative press coverage Ireland received recently” said Aidan.
The Government has again focused on boosting certain sectors of the economy. “The pre-Budget lobbying of tourism and hospitality sectors has been a success with the retention of the 9% VAT rate and a reduction in the Air Travel Tax to 0%. The Construction Industry can also be somewhat satisfied with the extension of the CGT relief for properties purchased to 31 December 2014 and the introduction of a Home Renovation Incentive income tax relief of 13.5% for homeowners who carry out works on their principal residence. Crucially, this incentive is designed to support tax compliant builders and aimed to move activity out of the black economy” said Aidan.
“We believe that the government has hit just about the right balance with the additional taxation measures largely been kept away from income. Incentives were also introduced aimed at tackling those in the Black Economy. Measures to assist existing SME businesses were limited and this group of people who employ the largest number in the economy might feel hard done by yet again. Finally this is heralded as being the last major adjustment budget and we feel that some fundamental reforms that could have achieved in these difficult years have not occurred. The policy of cutting across the board using an axe rather than approaching it strategically, using a scalpel, is an opportunity lost perhaps” said Aidan.
Summary of other key measures of Budget 2014:
-35,000 pensioners will move from medical card to GP-only card
- Jobseeker’s Allowance for those under 22 cut to €100
- Corporation tax rate remains at 12.5%
- 10c increase on 20 cigarettes
- 10c on pint of beer, 50c on 75cl bottle of wine
- Free GP care for children under five
- €150m banking levy introduced
- New 41% higher single rate for DIRT on savings
- Air travel tax is gone from 1 April
- Telephone package for elderly scrapped
- Medical insurance tax relief capped at €1,000 for an adult and €500 for a child
- Prescription charges rise from €1.50 to €2.50
- Cash receipts basis for VAT increased to €2m
- Stamp duty exemption on share transfers on ESM market
-Pension fund levy increased to 0.75% in 2014 before decreasing to 0.15% in 2015