Insight from Conor Hynes, partner, Deloitte on Budget 2013
Corporation Tax
In this year’s budget, as has been the case over the last number of years, the Minister faced the difficult task of having to continue to raise revenue and cut spending to redress our budgetary position, while also trying to ensure that such measures do not damage the economy’s potential to grow, in what is already a challenging global economic environment.
The Minister’s reaffirmation of the Government’s commitment to the 12.5% rate of tax and to continuing to support FDI and “export led” growth in particular is positive.
Businesses are faced with very challenging times, both domestically and internationally, and the government’s commitment to a favourable corporate tax regime in Ireland is important as it allows business to plan appropriately for the medium to long-term and encourage foreign direct investment in Ireland. The Minister acknowledged that retaining Ireland’s competitiveness for foreign investment is a core part of the Government's export led recovery strategy.
Expanding Ireland’s business community by encouraging smaller domestic start-ups, SMEs and large multinational investors is an important part of the long-term solution. It is important that the Government continue to do everything possible to support business. From a corporate tax perspective, the Minister is introducing some additional measures in particular for the SME sector as part of a 10 point tax reform plan. This includes an enhancement of the 3 year relief for start up companies which will allow such companies to carry forward unused relief, and enhancing the R&D credit regime by increasing from €100,000 to €200,000, the amount of qualifying R&D expenditure which can benefit from the tax credit without reference to the base year.
The proposed introduction of REITS (Real Estate Investment Trusts) should assist in encouraging investment in the Irish property sector by foreign investors and it is hoped should provide some stimulus to the Irish property sector. Qualifying income and gains of a REIT will be exempt from corporation tax for the REIT.
In summary, the Government has had to make some very tough decisions that are designed to meet the required cut in the deficit in a way that, as much as possible, does not harm business and FDI. The Government’s continued commitment to the 12.5% rate and to a favourable CT regime is positive and provides business with the certainty that the sector requires. In particular, the introduction of specific measures to encourage the SME sector is welcome as that sector is key to growing the economy.
