Much of today’s Budget announcements were known in advance as an uncertain international climate dominated much of the debate.
Brexit in particular is recognised as presenting opportunities as well as risks as social welfare and pension payments are to increase by €5 per week it was announced in today’s budget.
Reduction in rates of USC today were targeted at low to middle income earners and individuals will welcome reductions in USC, as well as investments in childcare, education, and housing.
Garda and teacher numbers are set to grow. Over 2,400 extra teachers are to be hired in 2017 the Minister for Education and Skills Richard Bruton TD said today.
The Department of Education and Skill’s budget will increase by €458m (5.1%) in 2017 compared to the allocation for 2016 announced in last year’s budget. The total education budget for 2017 will be €9.53bn, in excess of 16% of total spending.
Sarah Connellan, tax partner at EY reacted to Budget 2017. “The Minister has announced some measures to enhance our personal tax regime, however whilst these new measures are positive, we still have a long way to go in improving our personal tax competitiveness,” she said.
“The Special Assignment Relief Programme (SARP) has been in existence since 2012 and was due to expire in 2017. We welcome the Minister Noonan’s announcement to extend this relief to 2020. The relief exempts 30% of an individual’s employment income over €75,000 from Irish tax for a period of five years, provided certain conditions are met, including the fact that the individual was employed abroad by an associate of the Irish employer for a period of six months before coming to Ireland. It is disappointing that there have been no changes announced to the taxation treatment of share based remuneration relevant to SMEs.”
Connellan also offered her opinion about domestic tax rates. “Ireland’s domestic personal tax rates are still amongst the highest in the EU,” she said. “It is therefore disappointing that there has been a very nominal positive shift in personal tax rates or bands. The only change has been a reduction in the USC rate of 0.5% within the three lowest bands which is a welcome development, however this will not mean a significant increase in individuals’ take home pay.
It is disappointing that no steps have been taken to abolish the additional USC surcharge on the self-employed
“Measures have also been announced to assist entrepreneurs, with the announcement of a 10% capital gains tax rate for those selling their business on gains of up to €1m.”
Audrey Lydon, head of Private Client Services at EY Ireland commented: “The increase in the earned income credit from €550 to €950 was expected and is welcome. It is another small step towards equalising treatment with PAYE workers but there is still a disparity between the two which is unfair tax discrimination. It is disappointing that no steps have been taken to abolish the additional USC surcharge on the self-employed.
“The reduction in the DIRT rate of 41% to 39% is a welcome measure. The rate will be reduced by 2% each year for the next four years to bring the rate back to 2013 levels of 33%. The reduction is a welcome change but in our view does not go far enough to encourage saving particularly when current interest rates are so low”.
Ray O’Connor, EY tax partner also added: “The low interest rate environment has allowed the Minister to reduce the main DIRT rate by 2% per annum to 33% in 2020. The tax rate applicable to gains from life policies and investment funds has traditionally changed in line with the DIRT rate. However, no mention has been made of any changes to these rates, which currently sit at a headline level of 41%.”
The Irish Tourist Industry Confederation (ITIC) has today welcomed Budget 2017, in particular the retention of the Vat rate for tourism services at 9% allows Ireland to remain competitive in this key period of post-Brexit uncertainty.
Tourism is performing strongly at the moment and is Ireland’s leading indigenous sectoral employer. Decisions taken in Budget 2017 are vital especially for a sector that is likely to be challenged by Brexit.
Chairman of ITIC Paul Gallagher said: “17 of the 19 eurozone countries have tourism Vat rates of 10% or less so the tourism Vat rate in Ireland is right-sized and competitive at the moment. Tourism employs 230,000 people throughout the country and its future growth is predicated on a competitive industry and appropriate government policies.”
Eoghan O’Mara Walsh, ITIC chief executive, expressed disappointment that investment in tourism was not greater in Budget 2017. He said: “Tourism capital investment by the State is very low and not appropriate for a sector that is so important to the economy. Equally marketing budgets by the State for tourism need to be increased significantly or otherwise visitor numbers will suffer in the near future.”
The National Off-Licence Association (NOffLA) has today acknowledged the Government’s decision to not increase excise duty on alcohol in Budget 2017; a move which will offer some relief to the difficulties currently being faced by the independent off-licence industry in Ireland.
Commenting on today’s announcement Evelyn Jones, director, Government Affairs stated: “NOffLA acknowledges the Government’s decision to retain the current level of excise on alcohol. Business owners across Ireland still face significant difficulties and in the wake of Brexit our challenges are further exacerbated. While excise has not been increased in Budget 2017 it is important to note that consumers still have to pay the highest rate of excise on wine in the EU. NOffLA views this as a punitive regime which deeply affects both our domestic producers and our international partners.
“We believe that this is making Ireland an unattractive place in which to do business, limiting the choice available to Irish consumers, and discouraging foreign investment in this country. NOffLA again calls on the Government to act on its commitment to the health of Irish people all across the country by restoring the ban on below invoice cost selling of alcohol.”
The Irish Heart Foundation have expressed its displeasure government will not implement a tax on sugar-sweetened drinks until April 2018.
“The decision to postpone the introduction of a sugar-sweetened drinks levy to 2018, despite it being a cornerstone measure of the new national obesity strategy, suggests there is still no genuine cross-Government commitment to tackling obesity,” Irish Heart Foundation head of advocacy, Chris Macey said.
Business owners across Ireland still face significant difficulties and in the wake of Brexit our challenges are further exacerbated
He added: “Today is World Obesity Day and new figures released by the World Obesity Federation show there are now 54,280 obese, school-aged children in Ireland. They, and every other child in this country, have been badly let down in this Budget.”
However, the group welcomed the 50 cent increase in tax on cigarettes, saying the measure will continue to drive down smoking rates, particularly among teenagers, and thereby “act as another nail in the coffin of the tobacco industry in Ireland.”
Threshold, the national housing charity, has said this year’s budget has failed to introduce rent certainty measures to help tenants and first-time buyers.
Chairperson Aideen Hayden said: “Today’s budget recognised the need to assist first-time buyers, many of whom are trapped renting privately while for many more, owning their home is only a dream. While we acknowledge this support, Threshold believes that the best way to help first time buyers is to cap the exorbitant rents they are facing month after month.”