Insight from Padraic Whelan, partner, Deloitte on
Budget 2013
Business Tax
The much anticipated changes announced were well flagged in the run up to this afternoon’s budget with the bulk of the tax revenue coming from the new property tax (€500m), PRSI (C€300m), motor tax (€100m) and alcohol (€180m).
The impact will be a loss of income across all members of the community.
A lot of focus is being directed at the SME sector, and to that end a 10 Point reform Plan has been proposed to help small business. It is positive that attention is turning to this sector which supports a lot of employment throughout the country.
The measures around the Research & Development tax credit are welcome, in that the first €200,000 expenditure will qualify for relief irrespective of the amount of expenditure in 2003. This is twice the amount under the previous code.
Some of the other measures around close company surcharge, the small changes to the corporation tax relief for starts ups, are not hugely game changing. The extension of the Employment and Investment Incentive scheme (successor to BES Scheme) to 2020 is welcome, but the take up to date has been poor and given it’s a specified relief for income tax purposes, those that could potentially invest are less likely to as it can take time to get the full benefit of the tax relief.
In terms of the PRSI changes, the removal of the “PRSI weekly allowance” enjoyed by employees is being removed which will impact on take home pay. Likewise the self-employed minimum contribution will increase by a broadly similar amount. The amount involved for an employee is €276 extra per annum and for the self-employed an extra €247 per annum.
SME business will welcome the fact that transport costs will be helped this time with no change in the excise duty on petrol and diesel. In addition, a relief from excise duty is proposed on auto-diesel for licensed road hauliers with effect from 1st July 2013. On the negative side, there are some increases as expected in motor tax and VRT.
In terms of pensions, the inclusion of a once off option to withdraw up to 30% of the value of AVC’s may suit some people even though a person will be subject to tax at the individual’s highest rate . It might help someone who has a smaller income in a particular year and needs the funds. It’s a once off option and can be utilised in the 3 years post the passing of the Finance Bill. There will also be limits around the maximum pension that can be funded by tax deductible contributions. Details will follow in the Finance Bill.
Employees who have obtained preferential loans from their employers (at low interest rates) will have the Benefit in Kind increased from 12.5% to 13.5% whilst there is a decrease for home loans given by an employer, by 1% down to a 4% Benefit in Kind.
Minister Noonan closed by saying the increase in tax-take next year and the following year will be around €500m as a result of the changes announced today. This means a lot of the pain has now been taken and with a reasonable wind on growth, there begins to be light at the end of the tunnel.
