Comment by Padraig Cronin, Head of Tax, Deloitte
This Budget is the sixth in a series which is designed to get the country back on track. The Government’s task is not made any easier by the state of the global economic environment where there is little growth. At the start of the process to redress our budgetary position, return to growth could have been anticipated. Such growth in itself would have cut unemployment, increased taxes and addressed part of the issue.
It is useful to consider what the Government must still achieve if we are to eliminate the Budget deficit. Corrections of €3.5 billion, €3.1 billion and €2.0 billion are required over the years 2013 to 2015 to get the deficit down to 2.9% - a requirement of being in the Euro.
Of the €3.5 billion required in 2013, tax changes account for some €1.1 billion. The main increases arise from the removal of the €127 per week exemption from PRSI, the introduction of the property tax, the increase in the CGT and CAT rates and the increase in excise duties. It is to be noted that the property tax and the proposed limitation of the tax deduction to pension contributions to provide a pension up to €60,000 per annum will result in additional tax revenue of €0.5 billion in 2014. As the Minister stated, progress is already being made to address the adjustment required next year. This must be welcomed.
Given the tight Budget position, it is encouraging that the Minister made specific reference to the SME’s. He recognises that this is the sector that is important in getting Ireland to grow and to lead us out of the present economic environment. While the changes are small, they must be appreciated and hopefully next year he will be able to give additional support to this important sector.
The Minister needs to be mindful of the changes that our nearest neighbour the UK is introducing. Following a different strategy, the UK has announced today a reduction in the corporate tax rate to 21%, widening of personal tax bands over the next few years and additional measures concentrated on their areas of expertise to enhance the UK as a location for foreign direct investment. It is important that we continue to review the attractiveness of Ireland and that we are not left behind.
In summary, as expected this is a tough Budget with many of the provisions being known in advance. Unfortunately, all sectors will be affected by the changes resulting in reduction in disposable income for most. However, it is probably true to say that those with higher incomes and higher valued homes will be pay the most and given the society we live in, this is how it should be.
I hope you find our commentary and analysis helpful to you and your business.
If you have any queries on any aspect of the Budget commentary or analysis, please feel free to contact any of the authors or your usual Deloitte contact.
Head of Tax & Legal Services