Comment by Padraig Cronin, Head of Tax, Deloitte
The Budget follows three other major announcements in recent weeks – The Medium Term Fiscal Statement, The Medium Term Exchequer Investment Framework and The Public Service Reform Announcements. Thus the Budget becomes the final part of the strategy for 2012 as the Government endeavours to meet the need to reduce the Budget deficit in 2012 to 8.6%.
The Budget achieves a reasonable balance between incentivisation and revenue raising measures. However, the revenue target for indirect taxes in the context of the impact of a 23% VAT rate will be challenging to achieve as consumer confidence remains fragile.
The focus on kick starting the property sector should pay dividends in the near term whilst the capital tax and ‘savings’ taxation increases are appropriately measured.
The reaffirmation of our commitment to the 12.5% rate coupled with the proposed improvement of our tax regime for expatriates underlines Ireland as being very much open for business in an FDI context.
The enhancement of our R&D tax credit regime, and a new foreign earnings deduction for employees of export orientated companies should help the indigenous sector.
The willingness of the minister to engage in further consultation in relation to pensions is a good illustration of the current modus operandi of this Government; an openness to new ideas and a willingness to engage with relevant stakeholders.
Clearly, more needs to be done. Further enhancements to our tax regime can assist our FDI positioning and underpin a recovery in the domestic economy. However, a good platform is now in place which can be added to in the Finance Bill.
In particular, Ireland is now very well positioned to attract high talent and capital intensive investments. The IMD World Competitiveness Yearbook 2011 now ranks us No. 1 globally as regards the availability of skilled labour.
We have an opportunity to convert what is currently a liability (in the form of welfare payments) into an asset (job creation) in the near term.
I hope you find our commentary and analysis helpful to you and your business.
Head of Tax & Legal Services