Budget 2013 Analysis | Deloitte Private

The Minister for Finance today (5th December) announced the Budget measures affecting Taxation and PRSI (social insurance) for the 2013 fiscal year.  

Private Companies

Recognising the difficult operating environment in the domestic economy for small and medium enterprises, the Minister brought forward a 10 point Tax Reform Plan. The provisions in some cases extend existing reliefs which are scheduled to expire (Stock Relief for farmers, Employment Incentive Scheme), bring a range of African countries within the existing Foreign Earnings Deduction Regime, increase the VAT threshold for the cash receipts basis of accounting and marginally improve some existing reliefs.

There has been no increase in the cost of employment of new workers e.g. employers PRSI which is to be welcomed.  

Although many of the measures will have a marginal impact on many private companies, it is positive that the Minister has targeted some measure of relief at those enterprises heavily dependent on the domestic economy, which have a significant potential to create employment once spending by consumers improves.  

Individuals

For private individuals, the introduction of the much heralded Property Tax is the most significant feature of the Budget.  This will affect the owners of all residential property, with a rate of 0.18% applying on values up to €1 million and 0.25% on any excess over €1 million.  The tax will commence on 1 July 2013, with a half year charge for 2013, and will replace the Household Charge which will cease on 1 January 2013.  The Non Principal Private Residence (NPPR) charge will cease from 1 January 2014.

Income tax rates and bands will be unchanged for 2013.  However, PRSI at the normal rate of 4% will from 2014 apply to unearned income such as rents, dividends and deposit interest.  Previously only the self-employed suffered PRSI on this unearned income.

The Film Relief Scheme has been extended to 2020 but will be restructured to focus the benefit of the relief directly to film companies rather than to individual high earning investors.

The rates of both capital gains tax and capital acquisitions tax are increased from 30% to 33% with effect from 6 December 2012.

Significant changes in the tax rules for pensions were expected but such changes have been deferred to 2014 to allow further analysis.  A once off option for individuals to draw down up to 30% of the value of Additional Voluntary Contributions has been introduced with withdrawals taxable at the individuals marginal tax rate.

For a detailed summary of all the changes being introduced please click here.